Gold has experienced some extremely strong bids since early October, when Middle Eastern tensions erupted, and hasn’t seen back since, with the exception of a sudden reversal downward yesterday, following the surge. Gold recently extended its remarkable advance, establishing a new high at $2,148 early Monday after markets reopened after the weekend which was a continuation of the precious metal’s good performance in recent weeks.

There were some sort of attacks on an American warship and commercial vessels in the Red Sea over the weekend, which raised concerns about regional stability. That added to the demand for Gold, together with further headwinds as a result of geopolitical tensions and health worries in China. The World Health Organization is paying close attention to respiratory ailment cases in China and the US is pushing to ban air travel from China.

The Gold demand has also been boosted in recent months by expectations that the Federal Reserve has ended of its rate hiking cycle and rate cuts are to follow. Markets are pricing in a possible 100 bps in rate cuts in 2024. Markets are now pricing in more than 50% of a 25 bps rate cut in the first quarter of next year.

But, the surge didn’t last long and Gold prices reversed from the new record high put in place yesterday after the previous high at $2,070 was broken, amid signs that the market’s aggressive pricing of FED rate cuts may have gone too far. The drop has painted an ugly bearish engulfing reversal candlestick on the daily chart.

After exploding out to a record high early in Asia before suddenly stalling, it went through an aggressive reversal. Buyers started fleeing for safety as Gold fell below $2,100 per ounce with strong momentum, which isn’t looking good. The decline at the 50 SMA (yellow) though at around $2020 where it bounced from and XAU/USD bounced $20 higher, where it met the 20 SMA (gray) which now turned into resistance. We are seeing if the $2, 000 will act as support and where might go long from.

Gold XAU Live Chart