Are Gold Bulls Experiencing “Aesthetic Fatigue”? Gold Prices May Soon Suffer a Sharp Drop

According to a recent article by the forex news website DailyFX, despite ongoing U.S.–China tensions, market concerns about economic recovery, and the ultra-loose monetary policies of central banks worldwide, the various factors that have been driving gold higher in recent months appear to be showing signs of “fatigue.”

From a technical perspective, the probability is quite high that gold prices will surge higher before retreating and continuing to decline.

The gold daily chart shows that, after closing below the upward trend line dating from March 20 on May 21, the decline widened. Although there was a short-term rebound, prices have remained below that trend line, indicating that bears continue to hold a relative advantage.

Meanwhile, the MACD indicator still needs to further correct the bullish divergence; the two lines have crossed in a death cross, and the histogram has fallen below the zero line. Coupled with the KDJ indicator’s three lines all pointing downward, it is clear that the market has further downside momentum ahead.

Support lies at 1,700 (the key psychological level), 1,660–1,670 (the previous low), and 1,647 (the 0.382 Fibonacci retracement of XA, where X is the March 20 low of 1,455 and A is the May 18 high of 1,765). Resistance above is near the 1,752 level—the reverse resistance point on the aforementioned trend line—as well as at the A level (1,765). Should prices fail to regain traction above this trend line for an extended period, the author would lean toward a downside test of the 1,660–1,670 support zone, or even lower levels.

However, should prices surge sharply and break above 1,765, gold could be poised to challenge the 1,800 level.

The gold four-hour chart shows that after testing 1,765 (Point X) on May 18, prices oscillated lower, briefly dipping to around 1,718 (Point A) before staging a modest rebound, thereby forming a double-top pattern. The outlook suggests further downside pressure.

In addition, after the price attempted a rebound but was met with resistance, two bearish retracement resonance patterns emerged: 0.5XA = AB and 0.618YA = AB, where Y represents the May 20 high of 1,754 and B is the May 22 high of 1,740. Under this bearish retracement resonance configuration, the price is highly likely to continue the recent volatile downward trend. Short-term support lies around 1,718 (point A); if this level is breached, the price could fall further to the 1,700 mark.

Upward pressure lies at levels such as 1741 (0.5XA and 0.618YB) and 1747 (0.618XA and 0.786YB). If the price breaks above the 1747–1752 resistance, it will invalidate the recent downward momentum and retest the 1765 level.