Gold Begins to Correct After a Long Rally, Will It Be a Fall?
Global gold prices are beginning to show signs of correction after a sharp rally in recent weeks. Despite briefly breaking through the psychological level of US$4,000 per troy ounce, gold is now seen moving cautiously amid a strengthening US dollar and rising government bond yields.
Market analysts believe that this weakening trend is primarily due to technical factors following a long rally, while medium-term fundamental factors still support the precious metal's strength.
Fundamental Factors: Gold Pressured by the Dollar, But Supported by Global Uncertainty
Several factors underpinned gold's movement today. The strengthening US dollar following hawkish comments from Federal Reserve officials has dampened gold's appeal as a hedge. US bond yields have also risen, adding to the pressure by increasing the opportunity cost of holding gold.
However, global demand for gold remains strong, particularly from central banks and institutional investors seeking protection against economic uncertainty and geopolitical risks.
"Structurally, gold demand remains solid. However, the overly rapid rally opens up room for a healthy correction before resuming its uptrend," said market analysts from Morgan Stanley in their weekly report, as quoted by Solid News Market Update.
Furthermore, improving trade relations between the United States and China have partially eased demand for safe-haven assets. Following the meeting between Trump and Xi Jinping in Malaysia, both parties agreed to expand economic dialogue and review strategic import tariffs—a move considered positive for global stability, but slightly depressing short-term gold prices.
Technical Analysis: Healthy Correction Amid a Still Positive Main Trend
Technically, gold prices are currently trading in the range of US$3,980–US$4,050 per troy ounce. The US$3,950 level provides strong support, preventing further declines, while the US$4,100–US$4,200 level represents a resistance zone that is difficult to penetrate without a new catalyst.
Some analysts see an "overstretched uptrend" pattern indicating a potential short-term correction.
"If the price fails to hold above US$4,000, a correction towards US$3,850–3,900 is very likely. However, if it manages to break through US$4,100, the opportunity to reach a new record will reopen," wrote MarketPulse in its technical analysis.
The RSI indicator also shows overbought conditions on the daily timeframe, supporting the potential for consolidation before the bullish trend resumes.
Fundamental and Technical Combination: Consolidation Phase Before a New Direction
The combination of still-supportive fundamentals (gold demand, global economic uncertainty, and loose monetary policy) and technical indicators indicating a saturated rally, has gold's current movement tending towards a consolidation phase.
Medium-term investors still see potential for upside if the Fed actually begins to loosen monetary policy later in the year. However, in the short term, pressure from a strengthening dollar could restrain gold's gains.
"The gold market is now at a new equilibrium point—between expectations of interest rate cuts and the reality of still-tight money markets," said Bloomberg Economics analysts.
Conclusion
Fundamentals: Still positive in the medium term, but short-term momentum is being held back by the strong dollar and high yields.
Technicals: Prices are in a healthy correction phase, with support at US$3,950 and resistance at US$4,100.
Outlook: Short-term consolidation, with the opportunity for a rebound remaining open if the Fed signals a dovish stance.
Gold remains a key instrument for investors seeking to avoid stock and currency volatility, but the market is now more selective, awaiting the direction of global monetary policy.
Source: Newsmaker.id
