Full-fledged gold correction targets $3,615–$3,640 range again

Last week, gold prices hit a new all-time high, surpassing $3,700 per ounce for the first time. This peak coincided with the Federal Reserve's (Fed) first interest rate cut since the start of 2025, triggering a pullback to $3,640. The correction was short-lived, lasting only for two trading sessions, after which buyers reemerged on Friday. Despite this recovery, however, the technical outlook suggests the downtrend is not yet over, with good odds of another decline toward the $3,615–$3,640 range.

The RSI indicator continues to reflect severe overbought conditions. Meanwhile, the MACD has halted its ascent and is now on the verge of issuing a sell signal for bullion. Given the nearly 12% rally over the past month, the midweek pullback seems modest. Quotes haven't tested the 23.6% Fibonacci retracement at $3,615. A descent to this level might help bring the overextended technical indicators back to normal.

The US Personal Consumption Expenditures (PCE) Index, set to be published this week, is poised to ignite a new wave of gold selling. Moreover, Friday's release of the regulator's preferred inflation gauge could temper investor optimism regarding the pace of monetary easing. A similar effect could ensue if politicians from the central bank strike an insufficiently dovish tone. Jerome Powell will set the stage for it in his speech tomorrow.

Following the recent Fed gathering, Deutsche Bank experts upped their gold price prediction for 2026, adjusting it from $3,700 to $4,000 per ounce. In spite of this improved long-run forecast, the team expects the metal to see minimal growth for the remainder of the year, as market quotes currently reflect expectations for further interest rate reductions. On top of that, analysts noted the fourth quarter has historically been a weak period for bullion, and traders may find stocks more attractive for potentially higher short-term returns.

The following trading strategy may come into play:

Sell gold at $3,700. Take profit: $3,640. Stop loss: $3,720.