Gold prices have been struggling on Monday, reflecting a moderate appetite for risk and the ongoing anticipation surrounding the US-China trade negotiations. The metal saw a decline of nearly 2%, lingering close to the $4,000 support level.
US President Donald Trump’s recent remarks, expressing optimism about achieving a favorable trade agreement with Chinese President Xi Jinping later this week, have alleviated some worries about additional global trade restrictions, thereby lifting market sentiment.
Technical analysis: Gold is in a bearish correction from all-time highs
Analyzing the 4-hour chart, it’s evident that the bearish trend has taken hold, as prices continue to correct downward from nearly hitting $4,400. Attempts to rise have not regained the previous support level of $4,185 from last week, further indicating bearish pressures.
In terms of immediate support, the pivotal psychological level of $4,000 is in focus, where the bear market found resistance on October 22nd. A breakdown from this level would lead down towards the lows recorded on October 9th and 10th, around $3,945, and the common Fibonacci correction target of 61.8% from the September 18th to October 17th upswing.
Attempts to push higher appear limited under $4,150 (from highs on October 22nd and 23rd). Should the price remain below this, the previous support of $4,185 could keep buyers somewhat tethered to the all-time highs of $4,380.
Looking further down, the $3,945 level had previously seen support on October 7th, 9th, and 10th. This level now stands as a potential target after the low recorded on October 2nd at $3,845. Meanwhile, the intraday high around $4,160 and the low on October 17th at $4,185 mark hurdles on the way to the previous all-time peak of $4,380.
Gold FAQ
Gold has held a significant place throughout human history, serving as a store of value and a medium of exchange. Nowadays, beyond its allure in jewelry, precious metals are often viewed as safe investments, especially during uncertain times. They are also commonly seen as a hedge against inflation and currency weakening since their value isn’t tied to any one issuer or government.
Central banks are the predominant holders of gold, typically purchasing it to bolster their currencies during turbulent periods. Adding gold to their reserves diversifies their foreign exchange holdings, enhancing the perception of economic stability. In 2022, central banks added 1,136 tonnes of gold—valued at around $70 billion—to their reserves, marking the highest annual purchase since records began. Governments like China, India, and Türkiye are rapidly increasing their gold stocks.
Gold generally has an inverse relationship with the US dollar and US Treasuries, which are key reserve assets. Typically, gold prices rise when the dollar drops, allowing investors and central banks to diversify during periods of uncertainty. Additionally, gold is often negatively correlated with risk assets: rising stock markets tend to depress gold prices, while declines in riskier markets usually benefit the metal.
Prices can fluctuate due to various factors. Geopolitical tensions and fears of significant recessions can lead to sharp increases in gold prices as its safe-haven status is sought after. As a non-yielding asset, gold often appreciates when interest rates fall, although rising costs can put downward pressure on it. Ultimately, movements in gold prices heavily depend on the US dollar’s performance, since gold is priced in dollars. A robust dollar usually suppresses gold prices, while a weaker dollar can drive them higher.
