Gold: Is the Glittering Rally Going to Continue?

On analysis of the movements of the gold futures since the advent of this rally on April 7, 2025 when the gold futures tested a low at $2971.59, found first significant resistance on April 22, 2025 at $3510, and continued to trade in a narrow range between $3318 - $3510 up to Sept. 1, 2025 when the gold futures found a breakout above this significant resistance.

Undoubtedly, this rally had started to accelerate since August 8, 2025, amid growing geopolitical concerns and tariff trade tensions, with the main reason being the extensive inflow of money through gold ETFs, which continued to accelerate this uptrend.

Second supportive reason behind this rally remains the massive buying in gold by the central banks, as central banks’ annual net gold purchases since 2022 have been more than double the average of the previous five years, topping 1,000 tons a year. That helped push prices to record highs above $4100 an ounce this month.

Now, the US and China continue to trade volleys in their ongoing tariff spat, the latest being Trump’s warning that he might terminate some trade ties with Beijing, including in relation to cooking oil.

The tariff shock from Friday – when Trump threatened additional levies of 100% on China’s U.S.-bound exports – continues to ripple through markets, though each wave has been smaller as investors assume the two sides will keep shoving each other but not come to blows.

On Tuesday, US Trade Representative Jamieson Greer said it depended on China whether the heightened tariffs kick in on November 1 or sooner, but acknowledged it might be hard for Beijing to find an off-ramp.

Secondly, Powell said on Tuesday that the overall U.S. economy “may be on a somewhat firmer trajectory than expected,” while also cautioning that “there is no risk-free path for policy as we navigate the tension between our employment and inflation goals.”

Undoubtedly, that echoed an IMF report which raised its global growth outlook as tariff shocks and financial conditions have proven more benign than expected. But the IMF warned that the trade war between the world’s two largest economies could significantly slow output.

I anticipate that amid such a scenario, gold futures have been overstretched by overly excited central banks as China, which has never officially commented on its reason for buying gold, has been adding gold to its reserves for 11months. Poland has been buying gold as well, but for a different reason, with war in neighbouring Ukraine a risk to its economy.

I find that gold is no one’s liability and nobody’s debt; its appeal is shining for central banks worried about the political security of their reserves, and this theme is likely to change once they find the denting impact of this massive buying on surging inflationary pressure and weakening currencies.

On the other hand, an extensive flow of money into gold ETFs could soon go down as some countries are reluctant to make significant changes in their tax setups, treating the investments in gold ETFs shortly, which will shift this inflow from gold to other safe havens, as gold has already lost its safe-haven potential at such over-stretched prices.

On the technical front, I find that the gold futures look ready to find an advent of a selling spree soon as the rally this week has pushed the gold futures much above the uptrend line, maintain this uptrend in a 42-degree angle, and this could result in an advent of a selling spree if the gold futures try to test the immediate significant resistance at $4242 where the big bears will load fresh shorts with a stop loss at $4359.40 for a target at $3525 as the fall could be steeper from these levels.

Undoubtedly, gold futures are going to test the trend line, starting from the mean point at the beginning of a rally seen from April 7, 2025, and ending on April 22, 2025.

I anticipate that any attempt by the gold bulls to hit this pivotal point could trigger a sharp selloff, and that is likely to turn the whole scenario in favor of the bears this week.

Finally, I conclude that if anything changes on the tariff tussle between the U.S and China or any back step by U.S. President Donald Trump, the bouts of market volatility over the past few sessions are a reminder of how fragile investor sentiment remains. Though everything looks indecisive, if any change could reverse the whole situation all of a sudden, and that could be a big jolt for the overly stretched gold bubble.

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