Gold cycle, profit-taking accelerates adjustment phase... Is the bullish trend still strong in 2026?

Gold price(XAU/USD) reached a historic high in the $4,550 range at the beginning of the month, then experienced a correction due to some profit-taking. As the year-end holiday season approaches and trading volume diminishes, market participants’ sentiment appears somewhat subdued. The potential strengthening of the dollar also acts as a factor limiting upward pressure on gold prices.

However, given that gold has risen by 70% this year, recording the best annual return since 1979, the foundation of the long-term upward trend remains generally solid. As the U.S. Federal Reserve’s outlook for a rate cut in 2026 materializes, the appeal of non-yield assets like gold could increase.

Technical signals, need for rest in overbought zone

Despite short-term corrections, gold prices are still firmly supported above the 100-day exponential moving average(EMA). They are close to the upper band of the Bollinger Bands, indicating room for further gains, but the Relative Strength Index(RSI) has exceeded 70, showing an extreme overbought condition. This suggests that a period of correction or sideways trading within a range may be inevitable before further upward movement.

Looking at resistance and support levels, the recent high of $4,550 is likely to act as a short-term resistance. If this level is broken, the target could extend to the psychological threshold of $4,600. Conversely, the recent low of $4,430 on December 23 serves as the first support level; if this is broken, potential declines could occur toward $4,338(December 22 low), and then to $4,300(December 17 low).

Macro environment, supportive structure for gold remains

The U.S. Federal Reserve has cut interest rates three times this year, and market consensus reflects two additional cuts next year. The CME FedWatch tool indicates an 18.3% probability of rate cuts, which supports the bullish outlook for gold prices. Rate cuts reduce the opportunity cost of holding gold, a non-yielding asset, making it relatively more attractive.

U.S. economic data shows that the weekly initial jobless claims ending December 20 were 214,000, exceeding expectations and indicating improvement. Attention should be paid to upcoming U.S. CPI releases, as inflation trends are expected to be a key factor influencing Fed policy.

Geopolitical risks cannot be overlooked. President Donald Trump mentioned progress in Ukraine peace negotiations but stated that no progress has been made on territorial issues. Such geopolitical tensions can continue to stimulate demand for traditional safe-haven assets like gold.

Future watch points

The short-term correction in gold prices can be understood as a technical overbought correction process. After a strong rally in 2025, profit-taking and fatigue may create buying opportunities. If the rate cut cycle in 2026 intensifies and geopolitical uncertainties deepen simultaneously, the long-term bullish outlook for gold could become even more robust.