Gold (XAU/USD) Market Outlook: Central Bank Demand and Price Correction, $3350/oz Incoming?

[Redator]

Gold prices continue to struggle this week with the precious metal unable to hold convincingly above the $3400/oz handle.

This is no doubt a surprise given the tensions in the Middle East as well as data from the World Gold Council monthly report which showed Central Bank buying remains elevated.

Sentiment has been swaying back and forth with Gold taking its cues from comments around the Israel-Iran situation. The fact that Gold has failed to make fresh highs as a result of rising Geopolitical risk does not bode particularly well for the precious metal.

Another sign that the bullish rally may have been waning even before the Israel-Iran conflict came in May, where buyers couldn’t drive gold prices higher than the previous month’s top. This was the first time this happened since November.

Central Bank Gold Reserves Survey 2025

The World Gold Council released the 2025 Central Bank Gold Reserves (CBGR) survey, held from February 25 to May 20, which highlighted the ongoing importance of managing gold reserves during tough times. This year, the survey hit a new record with 73 responses, the most since the survey began eight years ago.

The report painted a pretty picture for Gold demand, most respondents (95%) think central banks around the world will add more gold to their reserves in the next year.

This year, a record 43% of respondents believe that their own gold reserves will also increase over the same period. Interestingly, none of our respondents anticipate a decline in their gold reserves.

This should not come as a surprise as global uncertainty and nationalism continue to rise around the globe, Gold was certain to return to its rightful place as the ultimate safe haven.

Other key takeaways from the survey:

• The majority of respondents (73%) see moderate or significantly lower US dollar holdings within global reserves over the next five years. Respondents also believe that the share of other currencies, such as the euro and renminbi, as well as gold, will increase over the same period.
• The survey highlighted an uptick in respondents who actively manage their gold reserves, from 37% in 2024 to 44% in 2025. While enhancing returns remained the primary reason for this, risk management leapfrogged tactical trading as the second most selected reason.
• The Bank of England remains the most popular vaulting location for gold reserves amongst respondents (64%).

Central banks have accumulated over 1,000t of gold in each of the last three years, up significantly from the 400-500t average over the preceding decade.

A prime example would be the Peoples Bank of China (PBoC) which reported buying gold for seven straight months, adding 1.9 tons to its reserves in May. China's official gold holdings are now at 2,296 tons, making up 6.7% of its total foreign exchange reserves.

Source: World Gold Council

All of this bodes well for the longer term picture where Gold is concerned.

However, in the short-term the possibility of a deeper correction continues to grow. The longer the $3500/oz handle holds firm the more likely Gold is to revisit the $3000/oz handle and possibly previous all-time highs around $2800/oz.

The parabolic move higher this year and the back end of last year has not faced a meaningful pullback. Is the time nearing for a significant pullback in Gold prices?

The Week Ahead

The rest of the week will remain busy as the Middle East continues to be a source of focus. The situation is fluid and rapidly evolving, thus volatility could arrive at any moment.

From a data standpoint, tomorrow brings the FOMC meeting as well as updated Fed projections which could provide us valuable insights into monetary policy moving forward.

Following the retail sales data today, US short-term interest rate futures trimmed earlier gains with traders sticking to a September rate cut view. Any change in this regard from tomorrow's FOMC meeting could have a big impact on Gold prices.

For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (click to enlarge)

Technical Analysis - Gold

From a technical standpoint, Gold is struggling to hold above the 3400 handle.

The precious metal has been on a steady decline since the Sunday evening high around 3450.

The period 14 RSI has also crossed below the 50 neutral level hinting at a potential shift in momentum.

Just looking at price action and i drew in the Fib retracement tool with the golden pocket (61.8-78.6) region beginning around the 3353 mark. This would be the preferred area for a potential long position for would be bulls and could provide an excellent risk to reward opportunity.

Now a H4 candle close below the 3322 handle would invalidate the current bullish setup and could see gold fall below the 3300 handle.

However, bear in mind the FOMC meeting and Israel-Iran conflict which seems to be entering a crucial phase right about now.

Gold (XAU/USD) Daily Chart, June 17, 2025

Source: TradingView (click to enlarge)

Support

• 3372
• 3353
• 3322

Resistance

• 3400
• 3413
• 3450

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