Gold prices faced resistance at the $4,380 area and subsequently dropped over $100, influenced by optimistic market sentiment and a stronger US Dollar. President Trump’s plans to meet with Chinese President Xi and assurances over Taiwan’s status contributed to market calm.

Technically, a Double Top formation around $4,380 indicates potential further declines. Gold is nearing $4,260, with the Double Top’s neckline at $4,190 posing a critical level for confirming a downside move to $4,095, and potentially the psychological $4,000 level.

Gold As A Safe Haven Asset

Gold functions as a store of value and safe-haven asset, appealing in uncertain times. Central banks are major purchasers, with 1,136 tonnes added to reserves in 2022, driven by emerging economies like China and India.

Gold inversely correlates with the US Dollar and Treasuries, rising when the Dollar falls or when interest rates are low. Geopolitical tensions and recession fears also drive Gold’s price, with a stronger Dollar typically leading to price stabilisation or declines.

Given the rejection of gold at the $4,380 level and the subsequent drop, we see short-term weakness ahead. The improving market sentiment, spurred by easing US-China tensions, is strengthening the US Dollar and pulling capital away from safe-haven assets. This environment suggests that upside for gold will be limited in the coming weeks.

The dollar’s strength is further supported by recent economic data. Last week’s US Consumer Price Index report showed core inflation remains persistent at 3.1%, leading many to believe the Federal Reserve will hold interest rates higher for longer. Consequently, the S&P 500 has rallied over 3% in the past week, confirming a clear shift in appetite towards riskier assets.

Market Considerations For Traders

We are now closely watching the critical support level of $4,190, which marks the low from October 17. A decisive break below this neckline would confirm the bearish double top pattern, signaling that the recent upward trend has run its course. Technical indicators like the bearish divergence on the 4-hour RSI support this potential for a further downturn.

For derivative traders, this opens the door for considering bearish positions. A break of $4,190 could trigger selling towards the October 14 low of $4,095, with the pattern’s ultimate target sitting at the psychological $4,000 mark. Purchasing put options or establishing short futures positions could be a strategy to capitalize on this expected move.

However, any failure to break below $4,190 would invalidate the immediate bearish outlook. We must remain mindful that a strong bounce from that level could see prices re-test the formidable resistance at the $4,380 all-time high. A move above that peak would negate the double top and suggest the longer-term bullish trend is resuming.

Looking back, this price action is reminiscent of the consolidation we saw in early 2024, when gold corrected after hitting new highs before finding support. While long-term central bank buying, which we saw break records in 2022, continues to provide a floor for prices, recent World Gold Council data for Q3 2025 did show a slight moderation in purchases. This could give bears more control in the immediate short term.

Create your live VT Markets account and start trading now.