Gold enters overbought territory on higher timeframes and risks declining to 2,800

Gold prices have been in the overbought zone since early spring, but the first signs of bearish divergences appeared in fall 2024. Fundamentally, many factors supported strong demand for the safe-haven asset. The primary driver was growing geopolitical tensions in various parts of the world. Another reason was easing inflationary pressures in the United States and the consequent expectations of interest rate cuts by the Fed, which could trigger capital outflows from US debt. However, unexpected policy decisions by the new American administration dampened investor risk appetite, further boosting inflows into safe-haven assets like gold.

Looking at the weekly gold chart, the local peak of 2,800 is evident. This level is likely to act as a target in case of a bearish correction, which will sooner or later take place. The main question is when it will occur: today, in half a year, or even a year from now. While gold is at its peak, another signal on the chart suggests an imminent reversal—wide, flat price movements near market highs. This pattern displays gold's inability to sustain further upward momentum, yet not to weaken significantly. Bulls and bears are confronting each other within this wide range. Warren Buffett refers to such situations as “reversal points”, suggesting that now might be the right time to bet on a downward correction in gold.

The overall recommendation is to sell gold.

Take Profit: 2,800. Stop Loss: 3,700.

The volume of the opened position should be calculated so that the potential loss (protected by a Stop Loss order) does not exceed 1% of your deposit. If your account balance doesn’t allow opening a position of this size, it’s better to avoid entering the market on this signal and wait for other trade opportunities that meet low-risk criteria.