Recent developments in the Middle East, including escalating conflicts involving the U.S., Israel, and Iran, have heightened risk aversion among investors. The closure of the Strait of Hormuz has further contributed to a significant rally in gold prices. Given the ongoing geopolitical tensions, which are unlikely to de-escalate in the near term, the potential for a major correction in gold remains limited. However, minor adjustments are still anticipated. While the overall trend remains bullish and the direction is clear, entering trades requires careful timing rather than blindly chasing upward movements.
On Monday, gold experienced a gradual rise during Asian and European trading hours, reaching a new high of 5418. However, this upward momentum proved deceptive. During U.S. trading hours, a second attempt to breach 5418 failed, leading to a sharp decline to 5260—a substantial sell-off that underscores the market risks previously emphasized. Traders must remain vigilant regarding the timing of long positions.
The previous rally from the low of 5094 to the high of 5250 spanned approximately 156 points. Similarly, the recent decline from the peak of 5418 to the overnight low of 5260 covered about 158 points. Not only is the correction magnitude comparable, but the retracement also aligns with key support and resistance levels, suggesting that the price action around this zone will be critical in determining gold’s near-term direction.
The outlook for gold remains bullish, with a continued preference for long positions. Patience is advised as the market undergoes adjustments before resuming its upward trajectory. A breakout to new highs is expected in the near term. For long entries, the 5320 level serves as a reference point. During Asian hours, traders may consider initiating long positions near 5320, while monitoring whether prices can break above 5380. A confirmed breakout could signal an opportunity for additional long exposure. During U.S. hours, trading decisions should be based on real-time market signals, with the primary strategy being to buy on dips following corrections.