Gold Price Forecast - Gold Hovers at $4,055 as Strong Dollar Caps Gains — BofA Eyes $5,000 in 2026 on Global Supply Crunch

Gold (XAU/USD) Struggles Near $4,050 as Dollar Strength and Fed Divide Pressure Bulls

Gold (XAU/USD) remains trapped in a tight trading range, hovering near $4,055 per ounce, after falling for a third consecutive session. The U.S. Dollar Index (DXY) continues to trade around 100.10, close to a six-month high, pressuring the metal priced in dollars. Spot gold slipped 0.3%, while COMEX December futures declined 0.7% to $4,052.40. The greenback’s resilience has limited bullion’s safe-haven appeal, while shifting rate-cut expectations add uncertainty. The CME FedWatch Tool now shows only a 69% probability of a December rate cut, down from 74% last week, as hawkish tones from Dallas Fed President Lorie Logan and others countered earlier dovish comments from New York Fed President John Williams.

Fed Policy Uncertainty Creates Directionless Trading in XAU/USD

The precious metal’s recent weakness stems from diverging signals within the Federal Reserve. Williams’ remarks that policy remains “restrictive” left markets speculating about an early pivot, but subsequent comments from Fed officials in Chicago and Cleveland cooled expectations of imminent easing. This internal policy divide has kept traders cautious ahead of key macroeconomic data, including the Producer Price Index (PPI) expected at +0.3% MoM, Retail Sales forecast at +0.4%, and the Core PCE Index, the Fed’s preferred inflation gauge. These delayed data releases are set to shape the tone of gold trading into December. Until then, XAU/USD remains confined between $4,037 and $4,100, with traders showing minimal conviction and volatility dropping sharply.

Technical Setup: Gold Compresses Around the $4,000 Support Zone

Technically, gold is consolidating above its rising trendline near $4,000, where the 50-day moving average provides short-term support. The Relative Strength Index (RSI) remains neutral around 50, indicating an indecisive market. Price compression suggests energy is building for a breakout. A close below $3,960 could trigger a retest of $3,800, while reclaiming $4,200 would open the path toward $4,400. Volume has dropped significantly over the past two weeks, signaling traders’ hesitation ahead of Thanksgiving week. Despite weaker participation, central-bank accumulation continues to provide a floor for physical demand, preventing a deeper breakdown.

Macro Landscape: Tight Liquidity and Reduced Geopolitical Risk Limit Gold’s Upside

Gold’s short-term trajectory remains anchored by the dollar’s dominance and steady Treasury yields. The 10-year U.S. yield sits near 4.06%, keeping real yields elevated around 2.1%, which dampens interest in non-yielding assets. Meanwhile, geopolitical risk premiums have faded as the Russia–Ukraine peace framework was modified, reducing safe-haven buying. Even so, central-bank purchases rose 2.1% in Q3, with China, India, and Türkiye increasing reserves. Physical buying in Asia and the Middle East remains firm, particularly as UAE retail demand surged with premiums near $18/oz over spot. These flows have stabilized XAU/USD around $4,000 despite speculative outflows.

Bank of America Turns Bullish on Long-Term Gold Outlook

Bank of America (BofA) upgraded its 2026 gold forecast by 2.3% to $2,750/oz and raised its long-term assumption to $3,000–$5,000/oz, citing persistent macro imbalances and underinvestment in mining supply. The bank listed five long-term tailwinds: sustained fiscal deficits in the U.S., geopolitical fragmentation, limited new exploration, ongoing central-bank accumulation, and a weakening global growth outlook. Analysts added that unorthodox U.S. policies and the global move away from sovereign bonds continue to favor gold structurally. However, BofA noted that an overly hawkish Fed could delay this upside scenario by suppressing short-term demand.

Mining Sector Gains as Institutional Investors Rotate from Bullion to Equities

In response to the upgraded outlook, Barrick Gold (NYSE:GOLD) jumped 5.8% after BofA raised the stock to Buy, citing lower operating costs at Nevada Gold Mines, expansion potential at the Fourmile project, and an attractive valuation relative to peers. The brokerage sees a “multi-year rerating cycle” supported by rising long-term gold and silver assumptions. Freeport-McMoRan (NYSE:FCX) also advanced 2.26%, benefiting from BofA’s broader metals upgrade. Institutional investors are increasingly rotating toward producers as a leveraged play on higher bullion prices, even while ETF holdings in physical gold continue to decline.

Futures Activity Reflects Thin Liquidity and Neutral Sentiment

Trading volume in gold futures dropped by nearly 17% month-over-month as U.S. markets entered a low-activity phase before Thanksgiving. Average daily turnover has fallen to $61 billion, while speculative positions declined sharply. CFTC data shows net long contracts down by 45,000, marking the largest weekly reduction since March 2023. The sentiment is described as “cautiously neutral” rather than outright bearish, with traders unwilling to chase moves until U.S. inflation data clarifies direction.

Correlations with the Dollar and Equities Tighten

Gold’s inverse correlation with the U.S. Dollar Index (DXY) has strengthened to –0.81, with every single-point rise in DXY causing an average $35 drop in gold. The shift in capital toward equities has also pressured the metal. The S&P 500 gained 1.38% to 6,694.40, and the Nasdaq rose 2.24% to 22,771.49, diverting liquidity away from safe-haven assets. Meanwhile, Brent crude traded near $61.66, and WTI hovered at $57.79, showing limited inflation spillover into commodity-linked hedges.

Regional Trends and Central-Bank Demand Bolster the Floor

Physical demand in Asia and the Middle East continues to absorb dips. The UAE Gold Souk recorded increased trading activity with retail investors buying into the $4,000 level, viewing it as a long-term entry zone. In India, imports softened 7.5% year-over-year, but volume remains strong historically. The People’s Bank of China and Saudi Arabian Monetary Authority (SAMA) both increased gold reserves again in October, sustaining institutional support for the metal.

Investor Psychology and Market Phase of Gold (XAU/USD)

Market sentiment has shifted from euphoria in October, when gold reached above $4,150, to cautious accumulation between $3,900 and $4,050. The Fear & Greed Index for commodities sits at 46, showing a neutral emotional tone. The current phase mirrors past consolidation cycles in 2020 and 2022, which both lasted six weeks before breakouts driven by Fed policy clarity. This pattern supports the view that gold’s current stagnation is corrective rather than structural.

Quantitative Outlook for 2026 and Fair Value Range

Model-based projections link every 25-basis-point decline in real yields to an approximate 3.1% gain in gold, equivalent to about $125 at current levels. Under scenarios where real yields fall below 1.5%, models align with Bank of America’s longer-term range of $4,600–$5,000 per ounce by 2026. Historical correlations suggest a 0.72 beta between gold and 10-year real yields, maintaining predictive reliability since 2016.

Verdict — Gold (XAU/USD): Neutral Short-Term, Bullish Medium-Term

Gold remains pressured short-term by dollar resilience and uncertain Fed timing but is structurally supported by strong central-bank buying, tight supply, and institutional accumulation. The short-term bias remains neutral, with expected range between $3,960 and $4,120. Medium-term projections turn bullish, targeting $4,400–$4,600 as Fed easing begins in 2026. Long-term positioning remains strong buy below $4,000, aligning with macro liquidity recovery. The market’s consolidation phase should be viewed as preparation for the next leg higher once rate clarity returns.

That's TradingNEWS