Gold surpasses $4,550: prospects for continued stability amid profit-taking and supply-demand dynamics

Rugman_Walking · 2026-01-06T11:50:41+00:00

Gold prices have reached historic highs in 2025, with a 70% increase, but are currently facing short-term corrections due to profit-taking and a strong dollar. Despite potential price dips, expectations of Fed rate cuts in 2026 and ongoing geopolitical uncertainties suggest medium to long-term bullish trends for gold.

Rugman_Walking

2026-01-06 11:50:41

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Record-Breaking Bullish Momentum in Gold, Short-Term Correction and Rebound Scenario Emerges

Gold(XAU/USD) surged to a historic high near $4,550 during Monday’s Asian trading session, but then slightly retreated due to profit-taking. Gold prices have risen an impressive 70% in 2025, marking the strongest annual performance since 1979, which is interpreted as a normalization of overheated investor sentiment. As year-end holidays approach, trading volume has contracted, leading to increased short-term volatility.

Dollar Strength and Holiday Effect Limit Gold Price Gains

The strengthening US dollar exerts a direct negative influence on gold prices. Rising dollar index makes gold more expensive on the international market, reducing overseas investor demand. Additionally, as institutional investors begin to unwind positions ahead of the year-end holiday, trading volume continues to decline, further amplifying short-term fluctuations.

Fed Rate Cut Expectations Buffer Gold Price Decline

From a long-term perspective, a key factor controlling further declines in gold prices is the 2026 Federal Reserve(Fed) rate cut outlook. Following three rate cuts this year and hints of additional cuts next year, markets are responding proactively. According to CME FedWatch, the probability of a rate cut is currently 18.3%. A rate cut reduces the opportunity cost of holding non-yielding assets like gold, encouraging medium- to long-term investment demand. Moreover, ongoing geopolitical uncertainties are likely to further strengthen gold’s status as a traditional safe haven asset.

Overbought Signals in Technical Indicators Indicate Potential Correction Phase

While gold remains stably traded above the 100-day exponential moving average (EMA), the Relative Strength Index (RSI)( is above 70, suggesting short-term overbought conditions. Bollinger Bands still show room for upward movement, but technical signals warn that a correction may be inevitable before further gains.

Key Support and Resistance Levels and Macroeconomic Indicators Review

Resistance Level: If the current record high of $4,550 is broken, there is potential to rise toward the psychological mark of $4,600.

Support Levels:

Primary support: December 23 low at $4,430
Secondary support: December 22 low at $4,338
Tertiary support: December 17 low at $4,300

US Employment Data: Weekly jobless claims as of December 20 stand at 214,000, showing improvement over expectations and indicating resilience in the labor market. This data could influence the Fed’s rate decision path.

Conclusion: Despite Short-Term Corrections, Medium- to Long-Term Bullish Outlook Remains Strong

While gold may experience short-term weakness due to profit-taking, dollar strength, and holiday effects, the structural positives—2026 rate cut prospects and increasing safe-haven demand—are expected to significantly limit downside. Technical indicators suggest overbought conditions may lead to a correction, but the medium-term upward trend remains intact. Investors should monitor key support levels and economic indicators to formulate cautious trading strategies.

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