Gold prices are showing early signs of recovery after a 10% correction. The precious metal reached a low of $3,121 on Thursday, completing a $379 decline from the recent record high of $3,500 in April. By Friday, gold had triggered a potential one-day bullish reversal, establishing a higher daily high of $3,252 and a higher low of $3,154.
Several indicators around this week’s low signify its importance. The bottom line of a rising trend channel aligns closely with the lower line of a shorter falling channel. Support was successfully tested around the 50-Day Moving Average, now at $3,162, along with a descending ABCD pattern reaching its 100% target near $3,140.
A rally above Friday’s high of $3,252 will be a positive signal, indicating that gold might be ready to test higher price levels. However, the 20-Day Moving Average, currently at $3,302, marks potential resistance and needs to be reclaimed before higher prices can be achieved. On the other hand, a drop below this week’s low of $3,121 could signal the beginning of a possible failure of the near-term bullish trend, starting from the September swing low.
Given the recent sharp advance in gold to new record highs, a correction and possible consolidation would be expected before a move higher.
Gold sees early recovery signs
Gold is increasingly in focus among traders, investors, and central banks.
Predictions suggest that gold will rise to $3,700 a troy ounce by the end of 2025, up from $3,220 on May 15. Central banks purchase many tonnes of precious metal each month, contributing to this projected rise. Private investors might also turn to gold to diversify away from US assets, particularly if traditional equity portfolio hedges like US Treasuries continue to underperform during equity drawdowns.
Due to the comparative size of the markets, even a small rotation out of US assets into gold can significantly impact the gold price. “While the key factor since 2022 used to be central bank buying alone, ETF investors are now joining the gold rally,” says Thomas. As both compete for the same bullion, we expect gold prices to rise even further.
Gold prices have trimmed their 10% drop from a record high of $3500, suggesting that concerns over national debt are weighing more heavily on investors’ minds than inflation.
According to Adrian Ash, director of research at BullionVault, this shift in focus highlights changing investor priorities. While historical trends in precious metals can offer some guidance, they do not guarantee future price movements. Investors should remain cautious and seek professional advice to determine if owning bullion is right for them.
The value of precious metals, including gold, may fall as well as rise.