FxPro Market Review: Is Gold's Strong Profit-Taking Retreat Signaling a Reversal?

FxPro Market Review: A Strong Gold Profit-Taking Pullback or the Start of a Reversal?

Gold has been under pressure this week, having fallen to the $2300 per ounce level. Since the close last Friday, the stock has seen a cumulative decline of over 3.7%. The official trigger was the escalation of the conflict between Palestine and Israel, which was somewhat milder than expected at the beginning of the month. However, we believe that the current pullback is a welcome technical adjustment that could evolve into a bear market.

FxPro senior analyst Alex Kuptsikevich notes: Last Friday, for the second time in history, the spot market price of gold per ounce breached the $2400 mark. Once again, there was significant resistance at this level. Since the beginning of the week, we've witnessed systematic intraday selling of gold and silver, unrelated to the stock or currency markets. That is, traders focused on this concept, ignoring the global volatility of risk demand.

In this pullback, the price of gold has now fallen below the 76.4% mid-retracement level from the February low to the April high. This is an important signal of global turbulence, as we've seen in March, a relatively minor adjustment in a more pronounced bull market.

The magnitude of the decline in the past two days is the largest fluctuation in the past two years, which cannot be ignored.

Earlier, we noted a divergence between this indicator and the price, with relative strength indices touching the 85 level at $2100 and $2350. This was an important harbinger of the decline we see now.

However, as long as the price remains above $2360, the 61.8% Fibonacci retracement level, this positive scenario still holds. We believe gold has the ability to return to an upward trend after technical fluctuations.

The coming days' gold selloff could quickly elevate the price to $2360 per ounce. If it falls below this level, it will be the first significant signal of a real reversal. Dropping below $2185-2200 in the coming weeks will trigger a long-term trend reversal, with a potential downside target of $1900 by year-end.