An in-depth look at the gold market: Is the current recovery just a temporary rally? Bearish predictions for next week

Here are a few things I noticed during this round of gold price decline:

Frankly speaking, when the price of gold fell from 5411 to 4100, many people panicked. But in my opinion, this is just the beginning of rational market behavior – the greater the rise, the greater the fall.

Gold prices rebounded this week, breaking above 4500 and even breaking the long-term downward trend line. But I must say: don’t be fooled by this one positive candle.

The Basics: Where does the pessimist’s confidence come from?

The current drop in gold prices is no coincidence. There’s a neat logic behind this: geopolitical conflicts have a negative impact on gold prices: when fighting breaks out in the Middle East, oil prices rise first. High oil prices lead to hyperinflation. Hyperinflation means the Fed may give up on the idea of ​​cutting interest rates and may even be forced to raise them. As for gold, let it fall a little.

The specter of a rate hike is back: The Federal Open Market Committee kept interest rates steady in March, but markets are already pricing in a rate hike this year. The biggest concern with gold is rising interest rates – if you can’t make money from gold, why not buy US Treasuries?

Central banks began to undermine the system: the most surprising example was Turkey, which sold more than $8 billion worth of gold to stabilize its currency. Even central banks are selling; who will buy it?

Demand for exchange-traded funds (ETFs) is growing: Gold ETFs this month saw their largest net outflows since 2022, and hedge fund long positions fell to their lowest levels since October.

In short, the current fundamentals do not support a sharp rise in gold prices.

Technical Analysis: Recovery looks good, but don’t take it too seriously.

Technically, this week’s rebound has corrected some oversold indicators, and the 4-hour chart shows a recovery bottoming pattern. But look closer:
4600 points is the consolidation platform of the previous decline; its resistance is huge, which is obvious.

The 4700-4750 area is a hotbed for sellers; has it been hacked? Difficult.
An ascending triangle pattern has formed, but without volume support, it is a trap.
My point is simple: this rally is most likely sellers trying to heat up the market. Once individual investors complete their long positions, a new round of selling begins.

Basic strategy: mainly short selling, supplemented by short buying, and avoid chasing high prices.

My personal operating principles are very clear: short selling is the main strategy, and selling on rallies is the main strategy; buying positions are only for short-term speculation, and long-term holding is not recommended.

Specific trading strategies for next week

[Main strategy: mainly short positions]
The first selling area: a sell order is placed near the 4600 mark, and the stop loss order is above 4650.
Second Add Zone: If the price rises to the 4700-4750 area and shows signs of stagnation or exhaustion, add short positions in batches.

Selling target: first target 4500, second target 4370, final target 4100. Selling conditions: If the price falls below 4450 and then quickly falls below 4400, you can open a position directly with the target reaching 4100.

[Second strategy: short-term long]
Entry conditions: If the price rebounds to the 4500-4550 area and stabilizes, it can be bought in a small amount.

[Second strategy: short-term long]
Entry conditions: If the price rebounds to the 4500-4550 area and stabilizes, it can be bought in a small amount.

Strict stop loss: if the price falls below 4450, exit immediately.

Bull target: Take profits near 4600, don’t be greedy for too much.

Many consider the 4450 level to be the dividing line between bullish and bearish trends, and I agree with them. But what I want to emphasize is: once it falls below the 4450 level, do not hesitate, sellers will immediately push the price to 4370 or even 4100. Once below this level, do not expect a reversal.

My suggestion:

Don’t forget that the price fell 1000 points just because of a 2 day rally – a change in trend is never determined by one bullish candle.

I won’t go if the price rises to the 4600-4700 range. Let whoever wants it do it. I’ll wait until it’s time to place a short sell order.

Being short does not mean being overly pessimistic, but respecting the direction of the market. Current fundamentals and technical factors suggest caution.

If the price does fall below 4750 next week, I will admit my mistake. But until then, I’ll stick to my bearish stance.

Next week’s strategy and loss recovery guide

If you’re still not sure how to proceed next week, here’s a clear strategy:
For those who do not have a position: Pay attention to the support level in the 4500-4550 range on Monday. If prices stabilize, consider opening a short-term buy position in anticipation of a rebound, but remember to take profits quickly. The area above 4600 is our main battleground; do not hesitate to open a sell position when the price reaches this level.

For those who are currently losing their long positions: Honestly, if the underlying buy price of your long position is above 4800, then a rebound to the 4600-4700 range next week will be the best opportunity to reduce or exit the position. Don’t expect a sudden surge to 5,000, that’s unrealistic. Take advantage of rallies and exit when necessary while preserving your capital.

For those short positions that are currently losing money: If the underlying bid price of your short position is below 4300, don’t worry. As long as the price remains at 4450, the rebound is temporary. Be patient and wait for the next dip to recoup your losses. As for those with larger positions, you can consider reducing your holdings in the 4500-4550 range, while retaining funds to repurchase at a lower price.

Finally, let’s be honest:

In more than a decade of trading, I have seen many people get stuck on a rally, only to be severely punished by the market. This week, I don’t want to mince words – I’m a pessimist, I’ll be honest. If I’m right, we’ll win together; if I’m wrong, I’ll admit it so you don’t suffer.

If you agree with me and want to get instant trading signals, specific entry and exit alerts, or if you have open losing trades and don’t know how to manage them, follow my page. I will share every day:

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Follow me as we take advantage of this downtrend next week. The market waits for no one; opportunities always favor those who are prepared.

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