Gold correction looms amid overbought conditions and stronger dollar

Gold prices have been rising in recent days, hitting 3,360.13 at Monday’s opening. The key driver behind the rally remains heightened geopolitical tensions, particularly due to US trade policies and new tariffs. This has boosted demand for safe-haven assets like gold, keeping prices elevated. However, the sustainability of the current uptrend is uncertain given mixed signals from the market.

Amid ongoing trade tensions, gold ETFs are seeing increased interest from major institutional investors. Players like pension funds and hedge funds are actively building up their positions, boosting additional demand for physical gold. However, seasonal weakness in demand during the summer months could limit upside potential, as gold market activity typically slows this time of the year. Without sustained buying pressure, this could trigger a correction.

The Federal Reserve's stance on monetary policy is also weighing on gold. With a July rate cut now off the table, the metal's appeal as a non-yielding asset is waning. Markets are also skeptical about potential monetary easing in September. Meanwhile, a stronger dollar is capping gold's upside.

The technical picture shows an uptrend on the 4H chart, with prices climbing consistently since last Wednesday. The RSI (14) is at 82, signaling strong buying activity but also indicating overbought conditions. This suggests a potential correction in the near term. Trading volumes remain steady, with no significant increase. The 3,400 level serves as a major psychological resistance zone, which may become a turning point. If price approaches this area, we may see a pullback toward support at 3,300, where buyers should step back in.

Current recommendation:

Sell at the current price. Take profit – 3,300. Stop loss – 3,450.