The price of gold has experienced a significant pullback to the $2300 level this week, marking a decline of over 3.7% since the previous week. The main trigger for this downward movement in the gold market seems to be a less severe escalation in the Palestinian-Israeli conflict than initially expected. This unexpected turn of events has led to a more moderate correction in gold prices compared to the previous anticipation at the beginning of the month.
Despite the recent pullback in gold prices, some analysts view this as a welcome technical correction rather than a sign of a bear market. Last Friday, gold prices broke the $2400 mark on the spot market for only the second time in history, indicating strong resistance at this level. The current decline has seen systematic intraday selling of gold and silver, not directly correlated to fluctuations in the stock market or currencies. Traders are seemingly focused on market-specific factors, rather than global risk demand.
The price of gold has already retraced below the 76.4% intermediate level of the rally from February lows to April highs, signaling a more significant price correction. The RSI indicator has also sharply pulled back from the overbought territory, indicating an active downward momentum in the market. A divergence between the RSI and the price levels at $2100 and $2350 had previously hinted at a potential decline, which is now unfolding.
Despite the bearish signals in the gold market, the positive scenario remains valid as long as the price holds above $2360, where the 61.8% Fibonacci retracement level is situated. Analysts suggest that gold could potentially bounce back to the upside after a technical shakeout. However, a sell-off in the coming days could push the price down to $2360, with a further decline potentially signaling a true reversal in the market. If gold prices dip below $2185-2200 in the near future, there could be a long-term trend reversal with a downside target of $1900 by the end of the year.
Overall, the current volatility in the gold market reflects a mix of technical corrections and fundamental factors, with the potential for both upside and downside movements in the near future. Traders and investors should closely monitor key support and resistance levels to gauge the direction of gold prices in the coming weeks.