Gold edged higher at the start of this week’s trading after finishing lower on Friday, likely due to some profit-taking. Despite Friday’s weaker close, it still managed to notch an eighth consecutive weekly gain. But a shift in sentiment can trigger a sharp sell-off, and even gold is not immune, advises Fawad Razaqzada, technical analyst at Trading Candles.
Given gold’s positive correlation with the S&P 500 in recent years, a deeper correction in equities could well drag the metal lower in the coming days, especially as the metal remains at technically overbought level across multiple time frames
Friday’s stock market rout — the worst session of 2025 for US equities — came in response to weaker-than-expected economic data and a surge in long-term inflation expectations among consumers. The Dow and S&P 500 closed the session 1.7% lower, while the Nasdaq fared even worse.
Gold Daily
From a trading point of view, for now, there are no definitive technical signals of an imminent reversal. However, a break below $2,900 could serve as an early warning that bullish momentum is fading. A more concerning shift would be a decisive drop below $2,877, which would mark a lower low and possibly trigger a more extended correction.
Gold has been struggling to break through resistance around $2,940 – $2,950, an area aligning with the 161.8% Fibonacci extension from October’s downswing. This zone has already prompted some profit-taking.
Meanwhile the Relative Strength Index (RSI) remains at overbought levels across the daily, weekly and monthly time frames. Not only that, but the RSI is also in a state of negative divergence on these time frames, making a lower high compared to the underlying gold price, which has been making higher highs. This divergence suggests that the rally may be running out of steam.
Again, on the downside, $2,877 remains a key technical support. A breach of this level could signal a shift in sentiment, paving the way for a deeper correction towards the $2,790-$2,800 region.
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