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Gold’s Sharp Pullback Looks Like a Reset, Not the End of the Bull Run
Traders' Opinions
Summary:
Gold prices suffered their sharpest pullback in months after retreating more than 4% from record highs, but mounting geopolitical risks and a cautious market mood are helping the metal stabilize above key technical support near $4,300.
Buy
CLOSEDXAUUSD
End Time
4379.93
Entry Price
4555.00
TP
4290.00
SL
4319.61 -19.50 -0.45%
8993
Points
Loss
4290.00
SL
4283.52
CLOSING
4379.93
Entry Price
4555.00
TP
Gold prices (XAU/USD) are attempting to regain composure after suffering their steepest decline in months, underscoring how fragile sentiment has become at historically elevated price levels. The precious metal slid more than 4% from last week’s all-time high near $4,555, marking its weakest performance in recent months, as thin liquidity conditions amplified profit-taking during Monday’s session. By Tuesday, however, gold was showing tentative signs of stabilization, holding above the psychologically important $4,300 handle as geopolitical tensions resurfaced and investors reassessed downside risks.
The abrupt sell-off followed a powerful rally that had propelled gold to record territory, fuelled by expectations of easier global monetary conditions, persistent geopolitical uncertainty and strong demand for safe-haven assets. Yet the absence of deep liquidity, combined with overstretched technical conditions, left the market vulnerable to a sharp correction once momentum faltered. In my view, the magnitude of the pullback reflects not a fundamental shift against gold, but rather a classic reset after an overheated move.
Geopolitics remain a central pillar of support. Late Monday, Moscow announced it would reassess its position on peace negotiations with Ukraine after claiming that President Vladimir Putin’s residence had been targeted in an attack. The allegation, which Kyiv has denied, injected fresh uncertainty into an already fragile diplomatic backdrop and quickly dampened the cautious optimism that had emerged following last weekend’s meeting between U.S. President Donald Trump and Ukrainian President Volodymyr Zelenskyy. Any setback to peace prospects tends to reinforce gold’s appeal as a hedge against geopolitical risk, particularly at a time when broader markets are already on edge.
Tensions are also simmering in Asia, where China extended its military drills around Taiwan for a second consecutive day. The exercises have kept investors alert to the risk of miscalculation in the South China Sea, a region critical to global trade and supply chains. Adding another layer of uncertainty, President Trump warned that the United States could launch a new round of attacks on Iran should Tehran resume its nuclear weapons programme. The combination of flashpoints across Eastern Europe, East Asia and the Middle East reinforces the notion that geopolitical risk premiums are far from priced out, even after gold’s recent retreat.
Beyond geopolitics, markets are increasingly focused on U.S. monetary policy signals. Later on Tuesday, the Federal Reserve is set to release the minutes of its December policy meeting. While no immediate policy change is expected, investors will scrutinize the language for clues on how comfortable policymakers are with easing financial conditions and how they assess inflation risks. Any hint of a more cautious or divided Fed could support the U.S. dollar in the near term, potentially capping gold’s rebound. Conversely, confirmation that the Fed remains inclined toward eventual rate cuts would likely underpin bullion, especially after the recent correction has eased valuation concerns.
Technical Analysis
From a technical perspective, gold’s structure has weakened but not collapsed. On the four-hour chart, XAU/USD was trading around $4,372 after rebounding from Monday’s lows near $4,300. The Moving Average Convergence Divergence (MACD) histogram remains below the zero line, signalling that bearish momentum is still present, but the steady contraction from deeply negative readings suggests that selling pressure is losing intensity. Meanwhile, the Relative Strength Index (RSI) stands at 38.93, still below the neutral 50 level but recovering from oversold territory, an early sign that downside momentum may be stabilizing.
The break below the ascending trendline drawn from mid-December lows, now intersecting around $4,450, represents a notable technical setback. This level, together with the December 22 and December 24 lows at $4,430 and $4,448 respectively, forms a dense resistance zone that is likely to challenge any near-term recovery attempts. As long as gold remains capped below this region, the path back to the record high near $4,555 appears difficult.
TRADE RECOMMENDATION
BUY GOLD
ENTRY PRICE: 4380
STOP LOSS: 4290
TAKE PROFIT: 4555
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