Gold prices retreat from the peak, presenting a major opportunity in the Forex market and a strong month ahead

What is the Forex market? When discussing the movements of commodities and global financial markets, we need to understand the relationship between the US dollar and gold prices, as well as central bank communications. Last month, gold reached a record high, recording the best increase since 1980. Although it experienced several declines, the market is preparing for significant changes following the Federal Reserve’s policy decisions.

Gold (XAU/USD) has declined after some profit-taking as traders sold off part of their positions. Meanwhile, traders seeking gains decided to sell the yellow metal after rapid and parabolic increases. Volatility across financial markets (stocks, crypto, and commodities) has increased due to short-term risk reduction, but it remains important to note that gold has still gained over 23% since the beginning of the year. Its current value is around $5,315 per ounce, indicating a strong bullish trend.

Forex Market Analysis and the Dollar’s Influence on Gold

What drives gold movements currently is the strength of the US dollar. The US Dollar Index (DXY), which measures the dollar’s performance against a basket of major currencies, has risen, causing gold prices to fall. In our Forex analysis, we see that speculative strategies involve buying the strong dollar while selling high-value commodities.

US Treasury yields have slightly decreased by two basis points to 4.227% for the 10-year bond, limiting further losses in gold. However, such stable interest rates continue to support a strong dollar.

Fundamental Factors and Central Bank Decisions

The Federal Reserve kept interest rates unchanged at its latest meeting, signaling cautious outlook and indicating that next week, President Donald Trump will announce the nomination for the Fed Chair position, either Jerome Powell or another candidate.

US employment data shows initial jobless claims at 209K for the week ending January 24, down from the revised 210K, while continuing claims decreased from 1.865 million to 1.827 million, below estimates. This suggests the labor market remains stable despite economic challenges.

The US trade deficit widened to $56 billion in November, the largest since March 1992, driven by a surge in capital goods imports. These figures are directly related to trade policy changes and short-term business confidence.

Daily Movements: Profit-taking and Dollar Recovery

Gold hit an all-time high near $5,600 per ounce before financial market volatility spiked, causing prices to drop to a daily low of $5,098. The markets experienced declines across stocks, silver fell to $106.62 per ounce, and Nasdaq, Bitcoin, and Ethereum also declined.

Investors have been withdrawing some funds from commodities since the parabolic rise last month. Although tensions in the US-Iran region are considered a potential trigger, increased expectations of interest rate easing by about 48 basis points, according to Prime Market Terminal data, continue to support further gold gains.

Institutional Outlook and Price Targets

UBS has raised its gold price forecast to $6,200 per ounce for March, June, and September, up from the previous $5,000 estimate. This reflects institutional confidence in medium-term gold prospects. However, UBS expects the year-end price to be around $5,900, indicating a reassessment after recent valuation adjustments.

Technical Outlook: Lack of Clear Direction After Decline

Gold prices remain bullish but seem to be consolidating unless they can close above the high of $5,415 (since early month). The upward momentum has waned, as shown by the Relative Strength Index (RSI), which has fallen from overbought levels.

The RSI is currently near 70, indicating neither buyers nor sellers dominate the market. If XAU/USD stays above $5,300, it may move sideways within the $5,300–$5,400 range.

A breakout above this range could target $5,500 and the all-time high of $5,598. Conversely, if gold drops below $5,300, it could fall toward $5,200 or lower.

Summary and Outlook

November was one of the strongest months for gold since 1980. Despite short-term losses from profit-taking, the overall market trend remains supportive. The Forex market and commodity relationships are closely linked through the US dollar. As central banks prepare for easing policies, gold continues to be one of the most attractive assets for investors amid market uncertainty.