Gold has faced significant pressure this week, dropping back to the $2300 per troy ounce level. The decline of over 3.7% since Friday’s close can be attributed to a more moderate escalation in the Palestinian-Israeli conflict than initially expected. This pullback is seen as a welcome technical correction that could potentially signal the beginning of a bear market.
Last Friday, the price of gold broke the $2400 mark for the second time in history before facing strong resistance at this round level. In the past week, there has been a consistent pattern of intraday selling of both gold and silver, disregarding fluctuations in the stock market or currencies. This suggests a focused selling pressure on precious metals, independent of broader market trends.
The current pullback has pushed the price below the 76.4% intermediate retracement level of the rally from February to April, indicating a more significant global shakeout. The recent decline, the largest in the last two years, suggests a potential shift in market sentiment. The RSI indicator has also sharply pulled back from the overbought area, signaling an active downward move.
While the current correction is in play, the positive scenario remains valid as long as the price holds above $2360, where the 61.8% Fibonacci retracement level is situated. A potential sell-off in the coming days could test this support level, with a drop below $2360 signaling a potential trend reversal. If the price falls below $2185-2200 within a couple of weeks, it could indicate a long-term bearish trend with a downside target of $1900 by the end of the year.
The recent pullback in gold prices raises questions about the future direction of the market. While a technical correction is currently underway, the possibility of a bear market cannot be overlooked. Traders should closely monitor key support levels and price movements to determine the next trend in the gold market.