Gold momentum cools as overheating fears trigger profit-taking

After a significant rally brought the gold close to the key $3,950–$4,000 resistance zone, it started to show signs of correction. Although the long-term outlook is supported by fundamentals, including the ongoing US government shutdown, sustained expectations for Federal Reserve monetary easing, and a weakening yen, these factors are now largely reflected in current prices. This sets the stage for a potential consolidation or pullback.

The technical view is backed up by some important indicators on the four-hour (H4) chart. The Stochastic Oscillator, with %K at 66 and %D at 67, signals a decelerating uptrend after testing recent highs. A downward turn from a potential overbought condition suggests that buying pressure is fading, and market activity is possibly falling.

Volume analysis also supports this trend. The Chaikin Oscillator, after peaking on September 30, has since declined. The formation of a lower high on October 6 indicates weakening buyer momentum and suggests that traders are unable to overcome the prevailing resistance barrier. A renewed attempt at this level is expected to cause a reversal and a short-term corrective phase.

Positive fundamental drivers are unlikely to prevent a technical correction. The market has already absorbed the impact of the US government shutdown, delayed key employment data, and expectations of a rate cut. On top of that, the surge in investments in gold exchange-traded funds (ETFs) that occurred in September requires time to fully digest these gains. Consequently, a corrective move toward the $3,850 support seems to be the most probable scenario, providing a necessary pause after the sustained rally.

Here's a trading strategy to take into account:

Lock in profits at the current price. Take profit: $3,850. Stop loss: $4,010.

The forecast is relevant from October 6 till October 13, 2025.