Gold is approaching $3,900. Be wary of a technical pullback! A good opportunity to position for long positions is here.
Gold Market Analysis and Outlook | A Multi-Dimensional Interpretation Based on Macro and Technical Perspectives
I. Core Drivers: Macro Fundamentals
Yesterday’s strength in the precious metals market was primarily driven by the following two core macro drivers:
Rising risk aversion: The continued risk of a US government shutdown has driven continued flows of funds into traditional safe-haven assets like gold.
Strengthening expectations of a rate cut: US Treasury yields fell across the board (especially the more interest-sensitive 2-year and 5-year yields), indicating that the market is pricing in the Federal Reserve’s more dovish monetary policy outlook. According to the CME “FedWatch” tool, the market is pricing in a very high probability of rate cuts in October and December. This directly reduces the opportunity cost of holding gold and provides strong support for the price.
II. Market Review and Technical Patterns
Yesterday’s international gold price (COMEX gold futures) showed a trend of rising and then falling, with the daily chart closing in an inverted hammer pattern with a very long upper shadow. This pattern, appearing at a high point after a continuous rise, typically indicates:
Strong selling pressure exists in the $3,890-3,900 area above.
Bull momentum is weakening in the short term, and the market needs to digest profit-taking or undergo a technical correction to build new upward momentum.
III. Trend Analysis from the Perspective of Wave Theory
Based on the structural analysis of wave theory, the current gold price is operating within a clear driving wave structure:
The main upward wave (wave 3 or 5) is ongoing: The previous breakout of gold prices above key resistance levels, accompanied by increased trading volume and consistent with macroeconomic conditions, can be considered the beginning of a major upward wave.
It may currently be at the end of the smaller sub-wave (v): Yesterday’s surge and then decline, followed by the formation of an inverted hammer pattern, most likely indicates the completion or imminent completion of the last sub-wave of the current upward driving wave — wave (v).
Subsequent Evolution: A subsequent retracement of the corrective wave (A-B-C structure) is highly likely to follow. This pullback isn’t a trend reversal, but rather a healthy correction of previous gains, intended to set the stage for the next leg higher. Key support areas will be crucial in determining the depth and strength of this correction.
IV. Key Levels and Long/Short Strategies
Based on the above analysis, we have identified the following key levels and trading strategies:
Resistance Area:
Primary Resistance: $3870-3875 (Yesterday’s high and psychological barrier)
Core Resistance/Wave Target: $3890-3900 (Yesterday’s high and round number barrier, also a potential target for the V wave theory)
Support Area:
Primary Support: $3850-3855 (recent support level and bull/short watershed)
Core Support/Corrective Wave Target: $3835-3840 (near the 5-day moving average, crucial if a wave A correction occurs)
Strong Pullback Bottom: $3813-3792 (This area represents the ideal bottom of the corrective wave and a good opportunity to reposition bulls)
Trading Strategy:
Long Strategy: Today’s trading strategy will primarily focus on establishing long positions on pullbacks. Focus on gold’s performance in the 3850-3855 area. If it stabilizes, a small position can be used to test long positions. If a pullback finds stronger support near 3835-3840 or even 3813, it would be a more prudent opportunity to enter long positions in batches.
Short Strategy: Given the short-term overbought conditions and the topping pattern, a high-sell strategy can be used. Aggressive traders can try a light short position in the 3870-3885 area, hoping to capitalize on the A-wave decline of the correction. Conservative traders recommend entering short positions in batches near the core resistance area of 3895-3900, with strict stop-loss orders.
Summary:
Gold’s medium- to long-term upward trend remains intact, supported by macroeconomic fundamentals. However, short-term technicals suggest that gold prices are facing significant pressure at the key resistance zone of $3890-3900, potentially entering a corrective phase. Traders should avoid chasing highs at this level and patiently wait for gold prices to retest key support levels before entering a new round of long positions.
