Downtrend Remains Intact, Beware of an Oversold Rebound

Summary:

Gold has fallen below the psychological $4,000 level, marking its lowest point since November last year. The broader bearish structure remains firmly in place. However, with technical indicators now entering deeply oversold territory, traders should remain alert to the possibility of a short-term rebound driven by short covering. Unless there is a meaningful shift in the macroeconomic backdrop, the medium-term corrective trend in gold is likely to extend further.

SELL XAUUSD

EXP

PENDING

4080.00

Entry Price

3450.00

4390.00

4023.67 -2.81 -0.07%

Pips

PENDING

3450.00

Exit Price

4080.00

Entry Price

4390.00

Fundamentals

Spot gold recently broke below the $4,000 mark for the first time since November of last year, retreating approximately $1,600 from its all-time high of $5,596 recorded earlier this year. Market sentiment has clearly turned more cautious.

Looking back at the current cycle, gold's peak coincided with political developments in Venezuela following U.S. involvement. However, the sharp acceleration of the selloff occurred after the outbreak of the Iran war and Turkey's announcement of roughly $120 billion in reserve sales to defend its currency. More recently, newly appointed Federal Reserve Chair Waller delivered a surprisingly hawkish debut speech, triggering broad-based U.S. dollar strength and providing the latest catalyst for gold's decline.

From a macroeconomic perspective, the primary driver behind gold's sustained weakness is the market's renewed pricing of higher U.S. inflation risks and expectations that interest rates will remain elevated for longer. Although headline inflation data still appear relatively contained, underlying risks are accumulating through rising capital expenditures, expanding fiscal deficits, and increasing debt burdens. Faced with the prospect of renewed inflationary pressures, major central banks are inclined to maintain restrictive monetary policies, further reducing the attractiveness of non-yielding assets such as gold.

At the same time, geopolitical tensions in the Middle East remain unresolved, U.S. inflation concerns have not fully disappeared, and investor anxiety toward risk assets persists. Under normal circumstances, these factors would be supportive of gold prices. However, the dominant market narrative currently favors the U.S. dollar, with capital continuing to flow into dollar-denominated safe-haven assets, temporarily weakening gold's traditional defensive appeal. Going forward, market attention is likely to focus on whether signs of a meaningful slowdown in the U.S. economy begin to emerge. Should growth momentum weaken significantly, gold may once again attract safe-haven demand.

Downtrend Remains Intact, Beware of an Oversold Rebound_1

Technical Analysis

From the daily chart perspective, gold remains in a well-defined bearish trend. Prices are trading substantially below the 50-day, 100-day, and 200-day moving averages, indicating that both medium- and long-term momentum remain negative.

Price action continues to follow a descending channel, preserving the broader bearish structure. Meanwhile, the Relative Strength Index (RSI) stands at 29.32, firmly within oversold territory. While bearish momentum remains dominant, the risk-reward profile for initiating new short positions has become less attractive, increasing the likelihood of a technical rebound driven by short-covering activity.

On the upside, the first major resistance zone is located near $4,200. Additional resistance is found around $4,350, which coincides with the descending trendline. A break above this area would suggest a temporary easing of bearish momentum.

Further higher, the 200-day moving average near $4,475 and the 100-day moving average near $4,692 form a critical medium-term resistance zone. Only a decisive breakout above this area would be sufficient to challenge the current bearish structure.

On the downside, the psychological $3,900 level represents the most important near-term support. A sustained break below this level could trigger a deeper corrective phase despite oversold conditions and potentially expose the key historical support area near $3,885.

Trading Recommendation

Trading Direction: Sell

Entry Price: 4,080

Target Price: 3,450

Stop Loss: 4,390

Valid Until: 23:55, July 23, 2026

Support Levels:3,959\3,930\3,887

Resistance Levels:4,043\4,092\4,124

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