On Monday (September 23) during the European trading session, spot gold prices suddenly fell sharply after reaching a historic high. Currently, the gold price has fallen to around $2618 per ounce and has turned from rising to falling during the day. In the late trading session of the Asian market, the gold price once reached a high of $2631.37 per ounce, breaking the historical record. However, the subsequent pullback made market sentiment cautious.

Last Friday, the price of gold closed at $2620.91 per ounce, a daily increase of $34.42, or 1.33%. Despite recent strong gains, the market shows signs of weak bullish momentum. Senior analyst Dhwani Mehta pointed out that on the daily chart, the relative strength index (RSI) of gold shows overbought, indicating that there is downward pressure on gold prices in the short term.

Technical analysis: signs of overbought appear, short-term risks intensify

Mehta warns in the latest technical analysis that the current 14 day Relative Strength Index (RSI) for gold is at 72, within the overbought zone, indicating the risk of further pullback in gold prices. If the gold price continues to decline, it may test last Friday's low of $2585 per ounce in the short term. Once it falls below this support level, gold prices may face the possibility of further dropping to around $2550 per ounce, which is a static support level. If it continues to fall, $2535 per ounce will become a key defensive point. This support level is the convergence point of the August 20th high and the 21st simple moving average (SMA), which has a strong technical support effect.

On the other hand, Mehta also emphasized that if the bulls can successfully overcome the current pullback pressure and decisively break through the resistance level of $2630 per ounce, gold prices are expected to further rise. After breaking through $2630, gold will face a psychological challenge at the $2650 level. If it successfully stabilizes, the gold price may continue to rise and launch an attack towards the $2700 level.

Fundamental analysis: Geopolitical tensions support gold prices

Despite facing technical pullback pressure in the short term, global geopolitical tensions provide strong support for gold prices. Especially as the situation in the Middle East continues to escalate, it has become the main driving force behind the rising demand for gold as a safe haven. According to reports, over the weekend, Hezbollah launched at least 10 missiles at towns in the northern part of Israel's Jezreel Valley. In response, the Israeli Air Force carried out large-scale retaliatory airstrikes on southern Lebanon, targeting at least 110 Hezbollah strongholds in the area. This conflict has resulted in multiple casualties and the deterioration of the situation is worrying.

Analyst Christian Borjon Valencia pointed out that although all technical signals and market sentiment indicate that gold has an upward trend, the recent rebound has been too large and there is a risk of a pullback. However, he also emphasized that the tense situation in the Middle East will still limit the extent of gold price correction. Therefore, in the short term, gold may still fluctuate and consolidate within the range of $2585-2630.

Focus on short-term support and key resistance levels

For traders, the current uncertainty in the gold market is high, and trading strategies need to maintain flexibility. If the gold price falls below the short-term support of $2585 per ounce, caution should be exercised to avoid blindly buying at the bottom. You can consider buying on dips around $2550 per ounce, and the recommended stop loss level is below $2535 per ounce.

On the contrary, if the gold price stabilizes and breaks through the resistance level of $2630/ounce, it can follow up with multiple orders, and the target price can be set around $2650/ounce. Further upward movement can focus on the psychological level of $2700/ounce.

The long short game is intense, and attention should be paid to the demand for hedging

The current gold market is fiercely contested by both long and short sides, and in the short term, it is still necessary to pay attention to the impact of global geopolitical risks and market sentiment changes on gold prices. If the situation worsens further, gold is expected to once again receive support from safe haven buying.

At the same time, the direction of the Federal Reserve's monetary policy is also an important factor affecting the trend of gold. Recently, Federal Reserve officials have expressed a preference for keeping interest rates unchanged, which provides some support for gold prices, but its future policy trends still need to be closely monitored. If the Federal Reserve releases more signals about an economic slowdown, it may further push up gold prices.

Overall, although gold is facing short-term downward pressure, its medium to long-term upward trend has not been disrupted. Investors need to closely monitor the performance of key support and resistance levels, while being alert to the short-term impact of sudden market news on gold prices.