Gold expected to pull back to 2890 level within uptrend

Last week, gold prices once again hit an all-time high, rising above $2950 per ounce for the first time. The all-important level of 3000 is getting closer, but reaching it may be postponed until later. The gold price has moved far away from the medium-term uptrend line, and technical indicators point to a strong overbought condition. Before reaching new highs, the price may correct to the 2890 level.

Gold may experience a sharp decline after the release of the Fed’s preferred inflation indicator, the Personal Consumption Expenditures Price Index. Concerns around Donald Trump’s import tariffs have somewhat eased, but Morgan Stanley’s Michael Gapen calls for attention to other reforms. The US president intends to drastically reduce immigration to the country, from 3 million people last year to 1 million this year and to 500,000 in 2026. The limited supply in the labor market is a strong pro-inflationary factor.

Metals Focus specialists see another reason for the gold demand cooling. The US jewelry market continues to face difficulties due to the rising cost of precious metals. This year, an even greater decline in physical demand is expected as the number of weddings declines, the organization suggests. As Metals Focus warns, full-year gold jewelry sales could fall 13% from their 2021 peak and even dip below 2019 levels.

Such processes are already in full swing on the Asian markets. In India, dealers increased their gold discounts from $26 to $35 per ounce in a week. Despite the height of the wedding season, jewelry companies have stopped purchases and are waiting for prices to fall. In China, where gold traditionally trades at a premium over global prices, there are forced discounts of $1 to $3 per ounce to stimulate weak sales.

The RSI and Stochastic indicators are reversing downward from the overbought zone, confirming the high probability of a correction in gold prices. The nearest bearish target is the level of 2890.

Consider the following trading strategy:

Sell gold at the current price. Take profit – 2890. Stop loss – 2960.