Gold futures extended their record decline by approx. 0.3%, slipping to around $4,090-4,110/oz, as today’s dip buyers struggled to counter the shift in overall risk sentiment. Concerns over overvaluation and a fresh wave of profit-taking have intensified safe-haven outflows, amid easing geopolitical tensions and heightened focus on corporate earnings.
GOLD extended its record sell-off in the early trading, though declines halted before hitting the 30-day exponential moving average (EMA30, light purple), as investors bought the dip. RSI remained overbought (above 70) from the begining of September until yesterday. Source: xStation5
What’s shaping GOLD today?
- Profit-taking and overbought conditions: Gold experienced a dramatic rally since mid-August, with prices surging nearly 60% year-to-date. This rapid ascent pushed technical indicators such as the 14-day relative strength index into overbought territory for an extended period. As a result, many investors opted to take profits, closing long positions and triggering stop-loss orders, which amplified the pullback.
- Improved risk sentiment: Recent optimism around US-China and US-India trade negotiations, along with a slight easing of geopolitical tensions, has reduced the urgency for safe-haven assets like gold. On top of that, markets appear largely unfazed by the ongoing US government shutdown, with many investors betting it will soon end, as key payroll dates for federal employees are approaching, raising the political pressures for both parties. As risk appetite returned to financial markets, investors reallocated capital toward equities and higher-yielding assets, lowering immediate demand for gold and contributing to the sharp correction in prices. This is also visible in the overall outflows in safe-heaven currencies like USD, JPY and CHF.
- Long liquidation in futures markets: Record trading volumes in gold futures, combined with declining open interest, suggest that much of the recent price decline stemmed from investors liquidating existing long positions rather than engaging in new short-selling. Large players adjusting portfolios to lock in gains triggered cascading stop orders, further accelerating the short-term selloff.
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