Gold Caught Between Dollar Pressure and U.S. Sentiment Outlook

Rania Gule

It seems that gold is going through a delicate phase, balancing between long-term bullish momentum and short-term profit-taking pressures, at a time when global markets are on edge ahead of upcoming U.S. sentiment data. As prices approach the $4,000 per ounce mark once again, the key question resurfaces: can gold still break its historical ceiling at $4,059, or will the current corrective wave extend temporarily before the next upward leg begins?

From my perspective, the underlying outlook for the precious metal remains positive in the medium term, as gold is heading for its eighth consecutive weekly gain — a sign of investors’ continued confidence in the demand for safe-haven assets despite the volatility in U.S. monetary policy. Buyers have shown remarkable resilience in defending support near $3,946, suggesting that any current pullbacks still fall within the scope of natural corrections inside the broader upward channel that has persisted since the third quarter of the year.

In my view, several factors are driving this positive performance, the most notable being the prevailing cautious sentiment across markets. The ongoing U.S. government shutdown adds to financial uncertainty and strengthens demand for defensive assets. Meanwhile, declines in Asian equities and a pause in the U.S. dollar’s rally are giving gold technical breathing room to consolidate and potentially reclaim the $4,000 level, especially amid politically and economically tense global conditions.

On the monetary policy front, the dovish tone coming from Federal Reserve officials has provided further support to the yellow metal. Remarks from John Williams, President of the New York Fed, in favor of additional rate cuts this year, along with Mary Daly’s comments from the San Francisco Fed about a “risk management” approach to policy, clearly signal that the tightening phase is nearing its end. This implies that U.S. real yields are likely to decline further — a traditional tailwind for non-yielding assets like gold.

These statements gain even more importance as markets await the University of Michigan’s Consumer Sentiment and Inflation Expectations data, a key gauge for future monetary policy direction. Weaker-than-expected data could strengthen bets on faster rate cuts, boosting gold’s position against the U.S. dollar. Conversely, stronger data might trigger a temporary price pullback, though it would likely be limited given the broader safe-haven environment.

Another supportive factor for gold is the continued geopolitical tension on multiple fronts. Despite the relatively positive impact of the ceasefire agreement in the Middle East, escalating Russian strikes on Kyiv and White House statements pushing for an end to the war in Ukraine serve as reminders of global instability. In such conditions, investors tend to rebuild positions in volatility-resistant assets — with gold at the top of that list.

Gold’s price action appears confined within a narrow range below $4,000, reflecting the tug-of-war between bullish momentum and corrective caution. However, the Relative Strength Index (RSI) remains far from overbought territory, leaving room for another attempt to break the psychological barrier — particularly if upcoming U.S. data disappoints or if the dollar continues to weaken.

Although risk appetite has slightly faded, the absence of heavy selling pressure suggests that traders increasingly believe downside potential is limited. The metal continues to benefit from a mix of supportive forces: a slowing U.S. economy, rising rate-cut expectations, political gridlock in Washington over the budget, and persistent geopolitical tensions. This combination makes any short-term correction more of a buying opportunity than the start of a trend reversal.

On the flip side, short-term risks remain if the Fed unexpectedly shifts to a more hawkish tone or if inflation data comes in significantly stronger, prompting markets to reassess rate-cut expectations. However, such a scenario seems unlikely given ongoing signs of economic slowdown and growing concerns within the Fed about a potential recession.

In my opinion, the odds still favor a continuation of the broader uptrend, even if some price fluctuations occur before a stable direction resumes. As long as gold holds above the $3,920–$3,940 range, buyers are likely to maintain control, supported by lower bond yields and rising expectations of monetary easing. A clear breakout above $4,000 could quickly lead to a retest of the previous peak — and potentially to new record highs if both technical and fundamental conditions align.

In conclusion, gold is facing a true test ahead of the U.S. sentiment data, but the macro environment continues to favor it. The combination of financial and political caution, expectations of rate cuts, and a softer dollar reinforces the view that the precious metal has not lost its shine. While the path to new highs may require patience, the overall trend remains confidently bullish — keeping gold the preferred choice for investors seeking protection amid economic and political storms.