Where will gold prices go from here?
- Samuel Morton
- Feb 12
- 5 min read
The recent rally in gold has been outstanding. I've never seen a bull run in gold like this in my 15 years of trading. Now that there has been a retracement and volatility has decreased slightly, where will gold go from here? Will the price become bullish again, or could the retracement continue?
Why did gold rise so much in 2024 and 2025?
Unfortunately, I did not join the 2024 and 2025 rallies. Another trading regret to add to the pile. However, I did manage to profit from the retracement. I'll provide details of this another time. However, you're not here to read about my trading fails and successes.
To predict where gold prices may go from here, we must first understand why gold has been so bullish. Like many significant financial market rallies, the gold rally has been driven by a combination of factors rather than a single factor. It's the combination of multiple factors that drives prices in the same direction, causing such jaw-dropping moves in markets. The reasons why gold prices are so high are:
Safe-haven demand (retail and institutional). Trump 2.0 has caused global uncertainty. His fiery temperament, frequent threats, and unconventional comments, posts, and decisions, whether good or bad, create uncertainty and undermine public confidence in the US financial system. Where does money flow to during financial uncertainty? Generally, the Swiss franc, bonds, and yes, gold!
Safe-haven demand (central banks). It's not just independent investors, hedge funds, and other funds offsetting risk by purchasing gold. Central banks have been doing the same. China recently encouraged its banks not be over-exposed to US treasuries. Being over-exposed to the US dollar is also a concern. Central banks have been buying gold.
A weakening dollar. Gold is priced in dollars (XAUUSD). The US, including the dollar, US treasuries, and US equities, is no longer as attractive as it once was. Money flowing out of US assets means fewer dollars are being bought and more dollars are being sold, causing dollar weakness. A weaker dollar means higher gold prices.
ETF buying. With the rise of ETFs, investing in the gold financial market has become more accessible, especially to retail and independent traders like you and me. An increase in gold ETF inflows means more gold buying by ETFs.
So, how does this help us to predict where the price may go from here? Well, are these driving forces still there, or are they diminishing? Is the uncertainty the same as it was? Is it weakening? Are central banks still buying gold? A change in these fundamental driving forces will affect the gold price, whether up or down.
Will gold prices remain bullish?
Let's break the fundamental driving forces into three digestible categories: market uncertainty, which is behind retail, institutional, and central bank buying, a weakening dollar, and ETFs.
Market uncertainty. Financial markets don't like Trump, unless we're talking about equity markets, but that's a different story. His threats and unpredictability create uncertainty, a major factor contributing to high gold prices. What could change this? Unless Trump experiences a Paul-like redemption miracle and 'sees the light,' i.e., completely changes character, the only way Trump's uncertainty is removed is if he is removed from office or has less power. The US midterm elections are in November 2026. A major win for the Democratic Party could help ease market uncertainty. On the other hand, if Trump cancels the midterms, becomes more aggressive over Greenland, or continues to surprise the world with drastic decision-making, uncertainty could increase, creating more upside potential.
A weakening dollar. The financial world order has changed. The US is still an attractive buy. However, it's not as attractive as it once was. The financial world has realised that the US is:
Not as financially safe as it thought it was. The US agenda can change completely with the election of a new president, causing uncertainty and unpredictability.
Not as much of an ally as it thought it was. In Western societies, especially in Europe, the USA is no longer considered a particularly reliable ally.
These factors decrease the desire for non-US investors to be so exposed to US financial markets. The financial world has realised that it has been over-exposed to US markets. This is not a light-bulb moment that causes a rush to sell dollar-denominated assets. It is more of an awakening and winding down of exposure to the US (the European way, slow, steady, and quiet). This means that we could see the dollar continue to weaken slowly over the coming years. A weaker dollar means higher gold prices.
ETFs. ETFs are not going anywhere. However, the initial gold rush may be over, which could reduce ETF buying.
Summary. Currently, the upside for gold depends on one major factor: what comes out of the US. Will the US provide calm reassurance, or will it cause more harm, unpredictability, and offence? The direction of the US may determine where gold prices go from here.
Gold has deep drawdowns: a caution for gold buyers
Gold has had several strong rallies in recent decades. The most notable are the rallies in 1979, 2004-2008, 2009-2011, and 2019. Lengthy drawdowns followed each of these rallies. All of which saw the price retrace to the monthly moving averages - at least to the monthly 50 SMA. Many of these rallies also ended with double-tops. Why do I tell you this?
If we've seen the gold top (for now), we may see either a decline in gold prices for several months, maybe even years, or another sharp sell-off. For the price to reach the monthly 50 SMA by the end of 2026, gold prices would need to fall to around $3,400, a 30% drop from their current level (February 2026).
Many of the gold rallies have ended with double tops, suggesting a return to the $6,000 highs may not signal further gains. It might be, as it has historically been, a burst of short-term buying before a drawn-out price decline.
Am I a gold bull or bear?
From the article, you'll know I believe things are currently up in the air. I'm in the 'let's wait and see what happens next' camp. It all depends on what happens in the global order next. Whether geopolitics returns to the norm or escalates further.
However, relying on technical analysis as my guide, I would be more keen to take mid-term shorts (IC Markets offers a positive swap rate shorting gold) rather than buying gold at its current price. Based on historical rallies, I wouldn't be surprised if price action forms a double-top and then enters a drawdown to the monthly moving averages. In the long-term, buying gold has always paid off. So, another significant retracement move would make me an immovable gold bull.
Comments