The yellow metal is showing signs of life after a brutal selloff, as spot gold recovers from its intraday low of $3,250 to trade near $3,287 per ounce during Monday’s Asian session. The rebound, though notable, comes amid persistent bearish pressure and shifting market dynamics that have dimmed gold’s safe-haven appeal in recent weeks.
FXStreet senior analyst Dhwani Mehta attributes the recovery to broad-based weakness in the U.S. dollar, which often moves inversely to precious metals. However, she cautions that the rally may be short-lived unless key resistance levels are reclaimed.
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Why Gold’s Rally Faces Uphill Battle
Despite the $40 bounce, technical indicators suggest that gold remains under significant pressure. Last week, spot gold plunged 2.8%, closing at $3,274.12 — its worst weekly performance in months. This selloff was fueled by improved risk sentiment across global markets.
Two major geopolitical and economic developments weakened gold’s traditional safe-haven status:
- A ceasefire agreement between Israel and Iran eased Middle East tensions.
- Signs of progress in U.S.-China trade talks reduced demand for避险 assets.
As investors rotated into equities and higher-yielding instruments, gold lost its luster. But with volatility never far away, traders are watching key levels closely for clues on the next directional move.
Technical Analysis: Key Levels to Watch
Resistance Zones and Momentum Challenges
From a technical standpoint, Mehta highlights that gold closed last week below critical support zones, signaling growing bearish momentum.
- The price fell beneath the 50-day simple moving average (SMA) at $3,325/oz.
- It also broke through the 50% Fibonacci retracement level of April’s record rally at $3,297/oz.
These breakdowns open the door for further downside unless buyers can reclaim $3,297. A sustained move above this level could spark short-covering and pave the way toward the 50-day SMA at $3,321.
Further up, the next major resistance lies at $3,350, a psychological barrier that coincides with the 21-day moving average — a confluence that often triggers profit-taking or renewed selling pressure.
Bearish Signals Persist
Even with the current rebound, momentum remains bearish. The 14-day Relative Strength Index (RSI) is still trading below 50, indicating that selling pressure outweighs buying interest.
“This suggests any recovery attempt may lack conviction,” Mehta notes. “Without a clear shift in momentum, we could see gold return to lower levels quickly.”
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Downside Risks: Where Could Gold Fall?
If the recent low of $3,248** gives way, the next support level comes into focus at **$3,232 — the 50% Fibonacci retracement of the prior upward move. A break below this zone would likely accelerate selling.
Further downside targets include:
- $3,168/oz, where the 100-day SMA converges with the 61.8% Fibonacci level — a historically strong support zone.
- A close below this point could trigger technical stop-losses and signal a deeper correction phase.
Market participants are now turning their attention to upcoming macroeconomic data and central bank commentary for direction.
What’s Next for Gold Traders?
Several catalysts this week could reignite volatility in the gold market:
- U.S. Job Openings Data (JOLTS): Set for release on Tuesday, this report may influence expectations for Federal Reserve policy.
- Fed Chair Jerome Powell’s Speech: Scheduled during the ECB’s 2025 Central Banking Forum in Sintra, Portugal, his remarks will be scrutinized for clues on interest rate cuts or tightening cycles.
- Comments from other Fed policymakers later on Monday may also impact dollar strength and, by extension, gold pricing.
With inflation concerns lingering and rate cut bets fluctuating, gold remains sensitive to shifts in real yields and monetary policy outlooks.
FAQ: Your Top Gold Market Questions Answered
Q: Why did gold drop so sharply last week?
A: Gold fell due to improved market sentiment driven by geopolitical de-escalation and progress in trade negotiations. These factors reduced demand for safe-haven assets like gold, prompting investors to shift into riskier but higher-return assets.
Q: Is now a good time to buy gold?
A: While gold has pulled back significantly, technical indicators remain bearish. Traders should wait for confirmation — such as a sustained move above $3,297 or rising RSI — before considering long positions. Dollar trends and Fed policy will play decisive roles.
Q: What economic data affects gold prices most?
A: Non-farm payrolls, CPI (inflation), PPI, and employment data like JOLTS influence interest rate expectations. Strong data tends to strengthen the dollar and pressure gold; weak data often boosts gold as rate cut speculation grows.
Q: How does the U.S. dollar impact gold?
A: Gold is priced in U.S. dollars globally. When the dollar strengthens, gold becomes more expensive for foreign buyers, reducing demand. Conversely, a weaker dollar typically lifts gold prices.
Q: Can gold recover if Powell signals rate cuts?
A: Yes. Lower interest rates reduce the opportunity cost of holding non-yielding assets like gold. If Powell hints at dovish policy shifts, it could spark renewed investor interest and drive prices higher.
Q: What is the significance of the 50% Fibonacci level?
A: It represents a key psychological and technical midpoint in a prior price move. Traders watch these levels closely because they often act as support or resistance zones during corrections.
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Final Thoughts: Caution Amid Volatility
While gold’s rebound from $3,250 offers temporary relief, the broader technical picture remains cautious. The combination of broken support levels, weak momentum, and strong resistance above suggests that upside potential is limited unless macro drivers shift dramatically.
Traders should remain alert to upcoming economic releases and central bank signals. In fast-moving markets, staying informed and agile is key to navigating uncertainty — whether protecting wealth or seeking opportunity in dips.
For investors monitoring the precious metals market, patience may be the best strategy until clearer trends emerge. But when sentiment shifts back in gold’s favor, early movers could benefit significantly.
All content is for informational purposes only and does not constitute financial advice.