Gold prices have experienced a decline as hopes for a rate cut diminish following a reduction in broader conflict risks in the Middle East. Attention is now turning to the upcoming Federal Reserve (Fed) meeting, with gold hovering above the psychological mark of USD 2,300, seeking stabilization and fresh market catalysts.
Since hitting a low on February 14th at USD 1,985, gold has surged by approximately 22.5% over the past two and a half months. The peak of this breakout rally occurred on Friday, April 12th, with prices reaching USD 2,431 before experiencing a sharp reversal later in the day, dropping to USD 2,334. Although bulls managed to push the gold price slightly above USD 2,400 in the following trading week, the all-time high was narrowly missed, peaking at USD 2,416.
Early last week, profit-taking led to another significant price drop, hitting lows around USD 2,291 on Tuesday morning. By the end of the week, prices gradually recovered to highs of USD 2,352, marking a stabilization above the USD 2,300 level after the recent pullback. However, the previously bullish outlook has been somewhat tempered.
Looking at the broader picture, since its panic low on October 6th, 2023, at USD 1,810, gold has appreciated by USD 621 per ounce, representing a 34.3% increase within approximately six months. The anticipated breakout rally has materialized, although the target price of USD 2,535 has not been fully realized.
With increasing reversal signals, there is a rising probability that gold has reached its peak at USD 2,431 and is now undergoing a correction back towards the breakout level in the range around USD 2,100.
Despite this, the tense geopolitical climate could spur renewed upward movement at any time. The slightly oversold technical chart and the potential consolidation triangle at a high level also support the idea of continued recovery and potential rally continuation.
Nevertheless, caution is advised, especially considering seasonal trends. Historically, after a strong rally, gold typically reaches a significant peak in the spring months between March and May before undergoing a correction lasting at least until midsummer. Investors should remain vigilant amid evolving market dynamics and geopolitical developments.
