Gold experienced a significant decline after reaching a historic high above $3,500 per ounce. As of April 23 at 8:30, the price dropped below $3,300 signaling a possible correction after the sharp rise.
Technical Analysis and Market Potential
The gold price extends its steady intraday descent during the first half of the European session. From a technical perspective, the precious metal now seems to have found acceptance below the 23.6% Fibonacci retracement level of the latest leg up from around $2,950 (monthly low). This could be seen as initial signs of possible bullish exhaustion and suggests room for further losses.
However, oscillators on the daily chart are still holding comfortably in positive territory, warranting caution before placing aggressive bearish bets. Therefore, it would be prudent to wait for a break below the 38.2% Fibo level around $3,289 before positioning for a meaningful corrective fall in the short term.
On the flip side, the $3,370 area (23.6% Fibo) now seems to act as an immediate hurdle ahead of the $3,400 mark. Some follow-through buying has the potential to lift the gold price to the $3,424-3,425 horizontal resistance, above which bulls could make a fresh attempt to conquer the $3,500 psychological mark. Sustained strength beyond this level would open the path for a continuation of the recent well-established uptrend of the past four months.
Fundamental Factors and Investment Perspective
The correction in gold price comes after nearly a 10% rally this month, with the metal entering overbought territory. Its 14-day relative strength index topped 78, exceeding the level of 70 that can signal an asset is overbought. “Gold’s tactically very overbought and extended – it’s risen $500 plus in 8 trading days, so naturally there’s likely a mix of a buyers pause and some risk reduction,” said Nicky Shiels, head of research and metals strategy at MKS Pamp SA.
Several factors are behind the significant decline:
- Trump stepped back from his threats to dismiss Federal Reserve (Fed) Chair Jerome Powell
- Easing geopolitical tensions increased investor confidence and weakened demand for safe-haven assets
- Upbeat comments from Trump administration officials about US-China trade talks
- Treasury Secretary Scott Bessent stated that the tariff war between the US and China would de-escalate soon
- White House spokeswoman Karoline Leavitt told reporters that the Trump administration is setting the stage for a deal
For investors, it’s important to note that gold has strengthened by approximately 29% this year, outperforming nearly all other major asset classes. The precious metal’s ferocious run began in early 2024, as central banks became big buyers seeking to diversify their foreign exchange holdings beyond the US dollar and insulate themselves from the threat of sanctions.
While the current correction creates room for a short-term decline, the medium-term outlook remains positive. “Bullion is extremely overbought in the short term, which makes it ripe for a correction. That, however, is not to be mistaken for its medium-term trajectory: bullion performs best when the global economy is in distress, and the scale of current economic uncertainty is immense,” according to Bloomberg strategists.
Factors Supporting Gold’s Long-term Value
Despite the current decline, several factors could maintain gold’s long-term attractiveness for investors:
- Trump’s rapidly shifting stance on trade policies has eroded investors’ trust and weakened confidence in the US economy
- Markets are pricing in the possibility that the Federal Reserve will resume its rate-cutting cycle in June and lower borrowing costs at least three times by the end of this year
- According to analysts at Jefferies Financial Group Inc., gold is now “the only true safe haven left”
- Chinese investors provide crucial support – trading activity on Chinese exchanges soared, with volumes on the Shanghai Gold Exchange reaching the highest since 2016
- Goldman Sachs forecasts that the metal could hit $4,000 an ounce midway through next year
The current decline could therefore represent an interesting opportunity for medium to long-term investors who believe in continuing global economic uncertainty and geopolitical instability. For short-term traders, however, it’s advisable to wait for stabilization after the correction and monitor further developments in US-China trade relations.
