Gold Price Outlook: Potential Short-Term Pullback After Strong Rally

Gold prices have surged 11% since the start of the year, but a short-term pullback may be on the horizon. Currently trading at around $2,869 per ounce, gold experienced a nearly 3% decline last week, marked by a bearish engulfing candlestick pattern. This signals a potential shift in momentum, which could lead to profit-taking among investors.

Key Support Levels to Watch

This week, traders are closely monitoring last week’s low of $2,832. A break below this level could trigger a sell-off toward the $2,790 mark, which was the all-time high for 2024. If prices fall further, the next key support level would be the trendline support at $2,750.

Historical chart patterns suggest that when a weekly candlestick closes lower than the previous week’s open, further downside movement often follows. Since April 2023, this pattern has occurred three times, each leading to additional declines.

Technical Indicators Suggest Bearish Divergence

Looking at technical indicators, the MACD and RSI are both showing potential bearish divergence. While gold has reached a higher high, these indicators are forming lower highs, which could signal weakening bullish momentum. This is another factor that may encourage caution among investors in the coming weeks.

Market Sentiment and External Factors

Despite the potential for a near-term pullback, gold prices may find support due to ongoing geopolitical uncertainty. Talks of a peace deal are adding to market volatility, while investors await key U.S. inflation data. Any positive inflation readings or confirmation of peace negotiations between Ukraine, the U.S., and Russia could encourage investors to take on more risk, shifting away from safe-haven assets like gold.

Gold’s Long-Term Potential Remains Strong

While a short-term decline is possible, analysts at Goldman Sachs remain bullish on gold’s long-term outlook. They project that gold could reach $3,330 per ounce by the end of 2025, representing a potential 15% gain from current levels.

Stay updated on key market trends and technical levels as gold’s price action continues to evolve.