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Analyzing the Trading Logic of Gold in Low-Liquidity Environments
Commodity
Summary:
Gold prices maintained their rebound amid expectations of a Federal Reserve rate cut and inflows of safe-haven capital.
Buy
CLOSEDXAUUSD
End Time
4371.24
Entry Price
4465.00
TP
4300.00
SL
4319.61 -19.50 -0.45%
7124
Points
Loss
4300.00
SL
4299.47
CLOSING
4371.24
Entry Price
4465.00
TP
Fundamentals
Since December, the precious metals market has undergone a significant shift in sentiment amid intense volatility. After hitting a record high last weekend, gold prices retreated sharply on Monday, with spot gold briefly dipping to around US$4,300. With year-end holidays approaching, overall market liquidity has tightened noticeably. Concentrated profit-taking by previously accumulated long positions amplified the technical correction following months of substantial gains. Concurrently, a mild rebound in the U.S. dollar exerted short-term downward pressure on gold prices.
The adjustment in silver has been more pronounced. Last week, driven by silver's sustained strong rally, market attention rapidly intensified. Rumors of a “short squeeze” and margin calls briefly fueled the final surge on Friday. However, as sentiment gradually cooled, silver prices swiftly reversed course, plunging over US$7 intraday—marking the largest single-day nominal decline in history. The precious metals market currently exhibits pronounced sentiment-driven characteristics, and gold was no exception. Affected by profit-taking, it experienced a daily decline of nearly 4%.
The precious metals market is currently navigating a relatively challenging trading environment. Overall market liquidity remains generally low, which tends to amplify price fluctuations abnormally: on one hand, hedge funds are reluctant to counter-trend interventions to hedge excessive moves amid insufficient liquidity; on the other hand, market makers are also actively reducing their participation, further weakening the market's buffering capacity. This structural characteristic makes short-term prices more susceptible to sharp spikes and plunges.
However, from a medium-to-long-term perspective, the macroeconomic underpinnings for gold remain solid. The market widely expects the Federal Reserve to maintain its accommodative monetary policy stance through next year and into 2026, with the outlook for a medium-term weakening of the U.S. dollar unchanged. Simultaneously, discussions surrounding central bank independence within the U.S. political landscape continue to amplify macroeconomic uncertainty, bolstering demand for safe-haven asset allocations. Against this backdrop, while gold and silver prices face near-term pressure from high-level adjustments and cooling sentiment, their downside potential is expected to be significantly constrained once the market completes its phase of consolidation.
Technical Analysis
During European trading hours on Tuesday, gold prices held steady near US$4,350, maintaining their rebound momentum. This followed a 4.5% decline the previous session—the steepest single-day drop since October last year—after which prices recovered some losses. The Chicago Mercantile Exchange Group (CME Group), one of the world's largest commodity trading platforms, raised margin requirements for gold and silver futures, triggering widespread profit-taking and portfolio rebalancing.
Based on historical instances where institutional selling pushed prices below US$100, buying on dips would be a prudent move, with stop-loss orders placed at the previous low.
Trading Recommendations
Trading Direction: Buy
Entry Price: 4345
Target Price: 4465
Stop Loss: 4300
Valid Until: January 14, 2026 23:55:00
Support: 4350, 4345, 4314
Resistance: 4391, 4367, 4498
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