The price of gold has found support at the $4,000 level, which marks a 38% Fibonacci retracement.
XAUUSD – Daily Chart
The price of XAUUSD has bounced from the $3,945 level and will now look to advance further. A move from the 38% support will aim to close the gap to the recent highs, but a failure would open the 50% level at $3,747.
Gold’s timing highlighted classic herd behaviour as the precious metal has been bounding higher, but topped out exactly as lines were forming around the world to buy gold. The correction struck fear into markets after panic buying was seen in India, Australia, and other nations.
Gold’s correction is a much-needed correction after heavy speculative buying. The price may look set to return to the highs, but momentum may have stalled after the recent price crash. It was also classic “buy the rumour, sell the fact” behaviour, as gold has powered higher on Federal Reserve rate-cut talk. But the price dropped ahead of this week’s cut.
The Fed was unsure about the December cut, and maybe some traders got a heads up on that scenario. With the rate-cut outlook clouded into year-end, it could remove another driver for the precious metal.
Institutional funds will be doing their annual position squaring ahead of year-end and may take some profits out of gold positions. The underlying dynamics still support bullion, but an agreement signed by Trump and Xi on trade is another headwind to price gains.
For now, traders can watch the strength of this bounce and decide if they feel a strong end to the year is possible. Central banks were still keen on gold amid dip buying, and South Korea was said to be considering joining the countries loading up on the precious metal.
It was noted in a financial outlet that South Korea’s last foray into gold came ahead of the 2012 high, before the metal went on a four-year correction.
