Gold Price Forecast: Breaking Below 50-Day Moving Average Opens Door to $3,245
By James Hyerczyk | Published: June 28, 2025, 07:16 GMT
Gold prices faced significant downward pressure last week, declining sharply as key geopolitical and economic factors shifted market sentiment. The precious metal (XAU/USD) fell 1.6% on Friday, closing at $3,274.17, marking its lowest level since late May. This decline was primarily driven by a pivotal U.S.-China trade agreement on rare earth materials and the release of hotter-than-expected U.S. inflation data, both of which undermined gold’s safe-haven appeal.
Key Developments Weighing on Gold
U.S.-China Trade Deal Sparks Risk-On Sentiment
The announcement of a breakthrough trade agreement between Washington and Beijing to expedite rare earth shipments to the U.S. was a game-changer for market sentiment. Rare earth elements are critical for numerous high-tech applications, and smoother trade flows reduce fears of prolonged supply chain disruptions. Investors interpreted the deal as a significant step toward easing trade tensions that had previously supported gold as a defensive asset.
Daniel Pavilonis, Senior Market Strategist at RJO Futures, noted, "The slowdown in geopolitics has offered an opportunity for investors to start taking profit because of the forward-looking prospects of some kind of kinetic war with China and the developments in the Middle East.”
Following the deal, global equity markets rallied strongly as traders rotated away from safe-haven metals into riskier assets, further pressuring gold prices.
Middle East Ceasefire Adds to Stability
Simultaneously, easing tensions in the Middle East, highlighted by a sustained ceasefire agreement between Israel and Iran despite minor skirmishes, reduced geopolitical risk premiums embedded in gold prices. The waning threat of regional supply disruptions across energy and commodity markets removed another pillar of support for the metal.
Inflation Data Delivers Additional Downside Pressure
On the economic front, Friday’s U.S. Personal Consumption Expenditures (PCE) report showed core inflation surged to 2.7%, well above the Federal Reserve’s 2% target. At the same time, personal incomes fell by 0.4%, painting a complex picture for consumer dynamics.
This hotter-than-expected inflation reading dashed hopes that the Fed might ease monetary policy anytime soon. Instead, it confirmed expectations that interest rates would remain elevated for the foreseeable future, evidenced by rising Treasury yields and a strengthening U.S. dollar.
Gold, as a non-yielding asset, typically suffers under higher interest rates and a robust dollar. Thus, the inflation data added to the bearish momentum originating from geopolitical improvements.
Technical Analysis: Breakdown Below 50-Day Moving Average Signals Further Declines
From a technical perspective, spot gold extended its weekly losses to 2.8% after decisively breaching the critical 50-day moving average level of $3,323.80. This breakdown triggered accelerated selling pressure and increased the likelihood of further downside moves.
Analysts are now eyeing key support zones at $3,245.56 and $3,120.76. Meanwhile, resistance is expected to remain strong around the $3,330 to $3,350 range, reflecting the recent breakdown area.
The inability to hold above the 50-day moving average adds a technical layer to the deteriorating fundamental backdrop. Unless geopolitical tensions escalate again or inflation surprises to the downside, gold’s outlook remains tilted toward weakness.
What Lies Ahead for Gold Investors?
The combination of easing geopolitical risks and persistent inflationary pressures has created what analysts describe as a "perfect storm" weighing on gold’s traditional safe-haven role. Risk appetite is improving globally, pushing investors toward stocks and other higher-yielding assets, while the cost of holding gold rises amid higher interest rates.
However, gold investors should remain alert to potential volatility triggers. Renewed conflicts in the Middle East or a deterioration in Sino-American relations could quickly revive demand for the precious metal.
For now, the market consensus points to continued technical pressure on gold prices, with the next notable target around $3,245. Should this level give way, more significant losses toward the $3,120 range could follow.
About the Author
James Hyerczyk is a seasoned U.S.-based technical analyst and educator with over 40 years of experience in market analysis and trading. Specializing in chart patterns and price movements, he has authored two books on technical analysis and has a comprehensive background across futures and stock markets.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Readers should perform their own research and consult with financial advisors before making any trading decisions.