Gold price continued its strong bull run and briefly retested the key psychological level at $5,000 for the first time ever. It has already jumped by 15% this year, beating the Dow Jones and the Nasdaq 100 indices. Still, there are signs that the ongoing rally may go through a brief pullback soon.
Gold Price Has Soared as Demand Rises
The ongoing gold price rally is happening because of the elevated demand and constrained supply amid geopolitical risks.
Data shows that many central banks have continued accumulating gold in the past few years, with some of them dumping their US treasuries. China holds US government bonds worth over $600 billion, down from $1.2 trillion a few months ago
There is a risk that some European countries will start doing the same as relations with the Trump administration remain tense. Also, many European countries are concerned about the $38 trillion US public debt.
There is a likelihood that geopolitical issues will continue in the near term, especially with American warships moving to the Middle East. Some analysts believe that Trump will ultimately attack Iran, especially after his success in Venezuela.
READ MORE: Shiba Inu Coin Price Eyes a Rebound as Key Metrics Deteriorate
Retail and institutional investors have continued buying gold in the past few months because of the Fear of Missing Out (FOMO). For example, the popular SPDR Gold Shares ETF (GLD) now holds over 34 million ounces of gold worth over $172 billion. Tether holds gold worth billions of dollars.
Gold price is also rising as Donald Trump considers the next Federal Reserve Chair. Data on Polymarket shows that most traders expect that either Kevin Warsh or Rick Rieder will become the next Chair.
Trump claims that the next Fed Chair will cut interest rates aggressively, potentially to 1%, despite the fact that the American economy is doing well. It expanded by 4.4% in the third quarter, while inflation has been contained.
Meanwhile, Wall Street analysts are still highly bullish on gold, with Goldman Sachs predicting that gold will continue rising in the coming months. Goldman Sachs predicts that it will jump to $5,400, while JPMorgan sees it hitting $5,000.
Other top banks like Bank of America (BoFA), Jefferies, and UBS have boosted their targets to $6,000, $6,600, and $5,400.
Gold Technical Analysis as it Gets Overbought
XAG price chart | Source: TradingView
The weekly timeframe chart shows that gold price has been in a strong bull run for years, making it one of the best-performing assets globally.
Gold has constantly remained above all moving averages, while the Average Directional Index (ADX) has jumped to 64, a sign that the strength is continuing.
The risk, however, is that gold remains much higher than the 50-week and 100-week Exponential Moving Averages (EMA), while the Relative Strength Index (RSI) and the MACD have moved to the overbought levels.
Therefore, there is a risk of a short-term pullback in the near term as investors book profits now that it has moved to the key target of $5,000. Also, it remains much higher than the moving averages, meaning that it may go through mean reversion in the near term.
READ MORE: PayPal Stock Charts Bearish Pattern Before Earnings Report
