Gold Hits $3,000, But Can It Hold?

Gold futures have reached a new record high of $3,000, and spot prices are expected to follow soon. However, psychological levels like this often bring sharp price swings in either direction. While the long-term outlook remains bullish, a short-term shakeout around the $3,000 zone seems likely.

Key factors influencing gold prices:

• Central banks continue to buy gold aggressively, supporting prices.
• A weaker U.S. dollar has fueled the rally, but a rebound could trigger a pullback.
• Markets are now pricing in a 70% chance of a Fed rate cut in June, up from 20% a few weeks ago.

With weaker CPI and producer price data, alongside uncertainty from Trump’s trade policies, gold has gained momentum. But traders should be cautious—large speculators have reduced long positions, potentially hoping for a dip before jumping back in.

Market Positioning: Speculators Hesitant, But Central Banks Driving Demand

Despite gold’s rally, large speculators have been reducing long positions since September, creating a bearish divergence between positioning and price action. Open interest has also declined, suggesting a lack of conviction among futures traders.

However, central banks remain the biggest buyers, and gold ETFs are tracking the move higher, keeping bullish sentiment intact. With physical demand strong, traders who exited their positions may be forced to chase the rally if gold continues to climb.

Gold and the U.S. Dollar: A Key Relationship

Gold’s rally has been largely driven by U.S. dollar weakness. However, when comparing gold against a basket of major currencies, its strength appears less pronounced. This suggests that if the U.S. dollar stabilizes or strengthens, gold could face a temporary pullback.

For gold to sustain a move above $3,000, traders will be watching the U.S. dollar index (DXY). A break below its November low could signal further upside for gold, while a rebound in the dollar might trigger a retracement.

Gold Technical Analysis: Support and Resistance Levels

On the 4-hour chart, gold futures are hovering around $3,000, while spot gold is slightly below the level. A 0.5% move higher could push spot prices past $3,000, bringing futures closer to $3,013.

Key technical levels to watch:

• Support: If a pullback occurs, buyers may step in around the February highs to prevent deeper losses.
• Resistance: A sustained breakout above $3,000 would require continued buying pressure, likely supported by further U.S. dollar weakness.

A shakeout near the highs is possible, with traders looking for dips to re-enter long positions. However, if the U.S. dollar index remains stable, gold may struggle to hold above the key $3,000 level in the short term.