Our focus today is gold: the $5,000-$5,100 range

Question: Professor, what happened to gold today? Opened high, why did it suddenly fall?

A: The price fluctuations were very violent this morning. Let me analyze the chronological order and you will understand:

Step One: Bullish Gap Trap (Opening) Affected by the positive non-agricultural data released last Friday and the ongoing geopolitical tensions over the weekend, gold prices opened directly higher in the Asian session today, approaching US$5,180. After the opening, the price rose to 5197-5198 US dollars, approaching the 5200 US dollars level.

At this time, the first reaction of many people is: “The demand for safe haven has arrived, let’s take advantage of the rebound.”

Step Two: Big Ups and Downs (First Wave of Sell-Off)

But that didn’t last long. Gold prices fell sharply after encountering resistance near $5,200, initially hitting around $5,122. Although some volatility ensued, the rebound momentum gradually weakened.

Stage Three: Continued Crash (Bull Market Pressure)

After that, the market entered a staggered decline: rebounding from $5,128, then falling again, then rebounding from $5,103, then falling again, hitting a low around $5,015, and finally falling below $5,100. Those who tried to buy the dip suffered huge losses.

Stage 4: Current Situation

As of this writing, gold prices are oscillating around $5,085 per ounce, with daily losses of nearly $100.

Question: Why did the price of gold fall instead of rising during the war? Doesn’t this defy logic?

Answer: This is a basic question. Many people believe that “war = safe haven demand = rising gold prices”, but today’s market trends show that the market logic has changed.

Let me explain this with an equation:

Today’s decline = inflation concerns caused by rising oil prices + dollar strength + profit-taking panic

1️⃣Fundamental contradiction: High oil prices enhance inflation expectations

Brent crude oil rose 20% to $111 a barrel today, and WTI rose 22%. Why is this bad for gold? Because higher energy prices will raise transportation and manufacturing costs, leading to a rebound in overall inflation. Inflation rebounds → The Fed is unwilling to cut interest rates and may even raise interest rates → Gold becomes less attractive.

2️⃣ The U.S. dollar unexpectedly strengthened

Normally, war-related funds would flow into the gold market, but today those funds chose the U.S. dollar. The U.S. dollar index opened 0.6% higher, directly causing the price of gold to fall in U.S. dollars.

3️⃣ Selling due to technology panic

After opening higher in early trading, prices fell, causing many retail investors who had been caught up in the rising market to fall into the trap of stop-loss orders; in addition, institutional investors used selling funds to close their positions, resulting in a situation known as a “buyer squeeze.”

Q: What about the technical aspects? What are the main price levels? A: Based on today’s lows and current trends, here’s the latest technical analysis:

Resistance levels:

The first resistance level: 5080-5100 area

Second resistance level: 5110-5120 area (the dividing line between bullish and bearish trends on the four-hour chart)

Support level:

First support level: 5015-5020 area (today’s low)

Strong support level: Psychological 5000 mark (almost broken today, the last line of defense for buyers)

If the price falls below the 5000 level: The next support will be between 4960-4980 and then between 4880-4900

Assessing the current trend: Looking at the daily chart, gold prices have broken through all of last Friday’s gains, indicating that the short-term trend is clearly weak. However, as long as gold prices remain above $5,000, the market is still in a consolidation phase and not a bear market.

Q: Is it a good time to buy when prices are low? How should I act?

Answer: The gold price is currently around US$5,085, which is a somewhat unstable situation.

Bold trading strategies (experienced traders can try small positions):

Buy: If gold prices fall to the $5050-5060 area and show signs of stabilization (such as a bullish candle), it is recommended to open a small buy position.

Stop Loss: Set below $5,015.

Target price: The initial target price is $5080-5100. If prices remain at this level, the price target will be above $5,120.

Conservative trading strategy (suitable for most traders):

Wait for gold to reach two extreme price levels: either test and hold support at $5,000 an ounce, or rebound to the $5,100-$5,120 range.

Establish long positions near US$5,000/ounce: If gold prices fall to the range of US$5,000-5,010/ounce and stabilize, you can establish long positions in batches and set stop-loss orders below US$4,980/ounce.

Open a short position near $5,100/ounce: If gold prices rebound to the $5,100-$5,120/ounce range, but the upward momentum weakens, you can consider opening a small short position with a stop loss above $5,135/ounce.

Q: What if the price of gold falls below $5,000 an ounce? Immediately close all long positions.

Don’t short sell casually. Wait for the next support level to hold ($4960-4980/oz) before entering a trade.

Some netizens asked: What should we pay attention to next?

A: There are three things we must pay close attention to that will be critical in determining the direction of gold prices in the near future:

1️⃣Opening the Strait of Hormuz:
If shipping resumes and oil prices fall, pressure on gold prices will ease; but if the blockade continues, oil prices remain high and inflation concerns remain, gold prices will remain under pressure in the short term.

2️⃣The strength of the US dollar:
The U.S. dollar index is currently oscillating strongly around 99.3. The dollar’s fall will provide gold with room to recover.

3️⃣This week’s U.S. Consumer Price Index data:
This is the most important data of the week. If inflation remains high, interest rate cut expectations will be postponed and gold will continue to face pressure; if inflation declines, this will be beneficial to gold.

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