Gold Price Predictions Amid Political Turmoil and Monetary Concerns

Gold experienced a period of sharp volatility after a significant crash from record levels, with spot gold prices dropping over 6% to reach $4,600. This steep decline was not driven by a fundamental change in long-term underlying demand but reflected a broad liquidity shock that impacted commodities, equities, and cryptocurrencies markets. This volatile environment will continue to directly influence gold price forecasts in the coming days and weeks, amid a complex balance between short-term technical pressures and long-term structural support.

Escalating Crisis: Margin Requirements Increase and Leverage Liquidation

The CME Group’s decision to raise margin requirements on gold futures from 6% to 8% was the key trigger for a wave of forced liquidations. This move, implemented at Monday’s close, forced highly leveraged traders to make a tough choice: either inject additional liquidity or quickly liquidate their positions to avoid margin calls.

The result was a rapid, purely technical sell-off, not linked to a real economic shift but driven by market structure dynamics. Gold entered this crisis heavily congested with buy positions, having been one of the most attractive assets for investor inflows from both funds and individuals during January. This concentrated positioning made the market highly sensitive to any negative trigger, no matter how small.

Reassessing U.S. Monetary Policy Expectations

The decline coincided with a fundamental reassessment of the Federal Reserve’s policy outlook. Investors recalculated their views on Jerome Powell, now seen as less “dovish” than previously assumed.

Although expectations still point to at least two rate cuts in 2026, the lack of a clear commitment to rapid and aggressive easing has diminished the positive momentum driven by early easing expectations. Powell is known for cautious stances on expanding the Fed’s balance sheet and focusing on inflation risks, which supports a scenario of relatively prolonged tight monetary policy. This shift does not eliminate the possibility of rate cuts but increases uncertainty and forces markets to reduce their overly bullish bets on liquidity-sensitive assets.

Technical Analysis: Clear Warning Signals

On Monday, gold entered a critical technical zone after falling from the $5,600 peak, with the current price at $4,557. This was one of the most severe corrections since January, as the price retraced gaps formed during the rally from $4,400 levels.

Drastic Momentum Shift:

The MACD indicator showed a complete reversal in momentum structure. The signal line crossed negatively below zero, with long, increasing red bars on the histogram, indicating full dominance by sellers. The widening gap between the MACD line and zero reflects intensifying bearish strength, increasing the likelihood of continued decline until the market hits key support levels.

The Relative Strength Index (RSI) plummeted sharply from overbought territory (above 80) to below 30 (oversold zone). This steep drop signals a complete exhaustion of buying momentum and suggests the market is now searching for a “new price base.”

Key Technical Levels:

Major resistance levels: $4,750, $4,950, $5,100

Important support levels: $4,400, $4,200, $4,000

Trading Strategy in a Highly Volatile Environment

Given current conditions, experts recommend a defensive stance: wait and watch before buying. Early purchases carry high risk at this stage.

The optimal strategy is to wait until the price stabilizes above $4,750 or until clear reversal signals appear (such as a “hammer” candle on the daily chart). In the short term, the metal remains highly volatile, with potential swings between support and resistance levels before resuming the structural uptrend.

Upcoming economic events that could influence prices:

European Retail Sales Data: Weak readings may heighten growth concerns and drive investors toward safe havens.

Eurozone Consumer Price Index: Rising inflation could reinforce expectations of European tightening, supporting the euro and reducing gold’s appeal.

US ISM Manufacturing Index: Lower-than-expected readings may raise recession fears and support gold.

Gold Price Outlook: Short and Medium Term

Recent forecasts suggest gold will continue experiencing sharp fluctuations in the near future. The recent decline was not solely due to fundamental factors but also coincided with increased margin requirements that weakened liquidity and forced widespread speculative liquidations.

Despite volatility, major financial institutions remain optimistic long-term. ANZ Bank expects gold to surpass $5,000 per ounce in 2026, supported by safe-haven demand. The World Gold Council confirms that ongoing economic uncertainty sustains safe-haven demand for the metal.

Some analysts see the current correction as a gradual entry opportunity, emphasizing the importance of technical support levels to protect the long-term bullish trend. Others anticipate a consolidation phase before resuming the upward momentum, especially if US inflation data shows further decline.

Overall, the outlook for gold prices remains positive but cautious. Short-term pressures are likely to produce temporary corrections, while structural factors such as geopolitical tensions, continued safe-haven demand, and central bank reserve accumulation provide solid medium- and long-term support. This makes any additional dips a potential buying opportunity at key technical levels.