Gold prices, having nearly reached a new record last week at $3500 per ounce, ultimately declined. The price quickly fell to the 38.2% Fibonacci retracement level (3290) of the April rally. Buyers of the metal became active, attempting to prevent further decline, though this may prove difficult. Technical indicators still suggest an extended pullback, with the next bearish target at the 50% Fibonacci level (3230).
The heated rally in the gold market halted following comments from US and Chinese officials about a potential tariff deal. Specifically, China exempted several US goods from high tariffs, which analysts interpreted as a significant de-escalation signal. Safe-haven demand weakened, while the dollar's rebound from three-year lows further diminished gold's appeal.
According to Bloomberg, hedge funds have reduced their net long positions in gold to the lowest level in over a year. Barclays Plc analysts highlight the metal's strong rally since early 2025, which has significantly outperformed most other financial assets. Traders may now shift to notably underperforming stocks and bonds, leaving precious metals in the background.
The physical gold market is seeing weaker consumption due to excessively high prices. According to today's report from the China Gold Association, the country's gold demand fell 6% in the first quarter of this year. Meanwhile, jewelry sales plunged 26.85%. The decline was partially offset by increased purchases of gold bars and coins, but the overall trend is clear: current gold prices remain unaffordable for most Chinese consumers.
The RSI indicator on gold's daily chart remains near the overbought zone, signaling the potential for a deeper correction. The nearest target for sellers is the 3230 level.
Consider the following trading strategy:
Sell gold near the level of 3290. Take profit – 3230. Stop loss – 3375.
This content is for informational purposes only and is not intended to be investing advice.
