Gold: Current Setup Challenges Bullish Outlook

Gold is dazzling at record highs, and bullish excitement is everywhere—but is it time to be cautious instead? After a dramatic surge in gold futures to a fresh peak of $4081.60 this Wednesday, the market quickly reversed, closing at $4030.34 and forming a classic bearish hammer.

Thursday brought more volatility, with prices swinging between $4059.55 and $423.15 before settling near $4052. This pattern, viewed across multiple time frames, raises a crucial warning: don’t let the bullish noise drown out the mounting signs of risk.

I find that these moves have finally formed a new price setup, after breaking the psychological resistance at $ 4,000. This ensures that if the gold futures don’t find a sustainable move above immediate resistance at $4081.60, could see a steep downward move to find a breakdown below the immediate psychological support at $4000 where a sustainable move below next support at the 9 DMA at $3040 could accelerate this slide to test the second support at $3864 before this week’s closing.

Undoubtedly, gold is up 54% year-to-date, after gaining 27% in 2024, makes it one of the best-performing assets of 2025, outpacing advances in global equity markets and bitcoin, US dollar and crude oil, while silver was up 71% so far this year, benefiting from the same factors driving gold’s rally as well as tightness in the spot market.

But, undoubtedly, this metals’ rally has been propelled by a combination of factors, including expectations of U.S. interest rate cuts, hefty inflows into ETFs and a weakening dollar whereas I find that something bad has been happening ever since we went off the gold standard as the US is basically stuck printing and spending, resulted in surging fiscal deficit while China seems to be on the same path as a massive buying by its central bank in 2024-25, resulted in weakening its currency while ignoring surging inflation concerns.

Secondly, the U.S. government shutdown entered its ninth day on Thursday, delaying the release of key economic data and forcing investors to rely on non-government sources to assess the timing and scope of the Fed’s rate cuts.

On Wednesday, International Monetary Fund’s Managing Director Kristalina Georgieva, while speaking at a Milken Institute event in Washington, said that the U.S. economy had avoided a recession that many experts had predicted just six months ago. She attributed this resilience to better policies, a more adaptable private sector, less severe import tariffs than feared, and supportive financial conditions. She forecasts only a slight slowdown in worldwide growth for 2025 and 2026.

I find that such a positive outlook of the global economy, expressed by the IMF Managing Director, looks quite supportive for the gold bears, as the gold futures, despite testing a record high at $4081.80, look ready to move against the bullish odds created by some analysts who expect the exacerbated levels for gold to test in 2025 and 2026.

Undoubtedly, while the market tests a record high, every analyst, including the fund managers, starts singing a bullish saga as I have defined a U-turn by Warren Buffett in my last analysis, on Oct. 6, 2025.

I find that if such big investors or so-called traders turn towards gold due to its overly stretched prices, heavy selling could start, as such traders aim only to make more and more profit while they start pronouncing higher levels for a commodity that was once declared by them as nothing more than a non-yielding asset.

Finally, I conclude that the gold futures look ready for a sharp reversal, as on Thursday, U.S. President Donald Trump announced that Israel and Hamas have agreed to the first phase of a Gaza ceasefire deal. Undoubtedly, this statement could add one more leg to the surging bearish sentiments in the yellow metal.

Disclaimer: Readers are advised to take any position in gold at their own risk, as this analysis is based only on observations.