Gold (XAUUSD) Price Forecast: Softer Inflation Boosts Bullish Sentiment as Markets Eye Breakout
By James Hyerczyk
Updated: December 21, 2025, 20:57 GMT+00:00
Overview
Spot gold prices continue to demonstrate resilience, sitting just $42.67 below their all-time record highs amid favorable inflation data and holiday season trading dynamics. Cooling inflation rates have lifted market sentiment, encouraging bullish bets as traders look toward potential breakout moves in early 2026. —
Gold Nears Record Highs Amid Supportive Market Conditions
Gold (XAU/USD) closed the week ending December 19 at $4,338.77 per ounce, gaining $39.39 or approximately 0.92%. This price level positions gold within striking distance of its record peak at $4,381.44. Throughout the week, buyers remained active, defending dips and maintaining a firm tone despite the Federal Reserve’s cautious stance on further monetary easing.
Inflation Data Points to Easing Price Pressures
November’s inflation reports revealed softer-than-anticipated figures, with core inflation at 2.6% and headline inflation at 2.7%, compared to forecasts of 3.1%. This moderation in inflation has bolstered confidence among traders that inflationary pressures are subsiding, nudging expectations toward additional policy easing, even though the Fed remains hesitant.
Following the December 10 rate cut of 25 basis points, the Fed’s updated target range stands at 3.50% to 3.75%. However, the accompanying dot plot projected only one additional cut in 2026, with three Federal Reserve officials dissenting—marking a level of internal division not seen since 2019. The market is pricing roughly a 21% chance of another rate reduction in January, viewing April as a more probable timing. Despite this somewhat hawkish tone, the easing measures taken thus far continue to provide critical support to gold prices.
Geopolitical Tensions Support Safe-Haven Demand
Geopolitical concerns remain a significant factor underpinning gold’s appeal. Escalating tensions between the United States and Venezuela—highlighted by the US halting sanctioned oil flows due to a tanker seizure—and ongoing conflicts involving Russia and Ukraine contribute to a risk-averse environment. This backdrop supports sustained demand for gold as a safe haven.
Year-to-date, spot gold has surged approximately 65%, marking its strongest annual performance since 1979 and underscoring the interplay between geopolitical risks and precious metals demand.
Technical Outlook: Key Levels and Trends
Traders eye critical technical levels as gold approaches its record heights during the typically lower-liquidity holiday period. The immediate support level is the weekly pivot at $4,133.95. Below this, a noteworthy support zone lies around the $3,886.46 swing low, with broader retracement levels between $3,846.50 and $3,720.25. On a longer-term basis, the bullish trend remains intact as long as prices stay above the 52-week moving average of $3,402.69. Additional tailwinds come from central bank buying, with approximately 220 tonnes added in the third quarter. China has extended its gold purchasing streak to 12 consecutive months, while Brazil has re-entered the market after a two-year absence. Exchange-Traded Fund (ETF) inflows remain positive, and market positioning does not yet suggest overheating.
Gold Price Forecast: Bullish Momentum into 2026
The primary upside target remains a retest of the record high at $4,381.44. A sustained break above this level could propel gold prices into the mid-$4,400s range, particularly if labor market data in early 2026 signals weakness—such as soft job numbers and unemployment rising above 4.5%—which would likely accelerate speculation about further Federal Reserve easing.
Short-term momentum appears stable as long as XAU/USD holds above the pivot at $4,133.95. The intermediate-term bullish outlook is supported while the $3,886.46 swing low holds, and the longer-term positive trend remains as long as price stays above the 52-week moving average. Under these conditions, bulls remain firmly in control, with the potential for another breakout to manifest early next year.
About the Author
James Hyerczyk, a U.S.-based veteran technical analyst and educator, brings over four decades of experience in market analysis and trading. Specializing in chart patterns and price action, he is an established author with expertise spanning futures and stock markets.
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Disclaimer: This article is for educational purposes only and does not constitute financial advice. Readers should conduct their own research and consult with financial professionals before making investment decisions.
Source: FXEmpire