Spot gold remained under pressure after breaking an ascending trendline on 22 October. It initially saw limited follow-through, but later extended losses as the price fell below $3,943, before sliding to a one-year low near $3,870 on 30 October.
The move was described as approaching oversold territory, yet downside momentum continued to point lower. Further weakness towards $3,700 was flagged as a risk, although the likelihood of sustained losses below that level was assessed as low.
Short-Term Bearish Bias and Downside Targets
We recommend that derivative traders maintain a short-term bearish bias as spot gold continues its descent following the breakdown of key support levels. After breaching the $3,943 floor and touching a multi-month low near $3,870 late last month, strong downward momentum indicates further downside toward the $3,700 handle in the coming weeks. Traders utilizing futures or put options can target this $3,700 region while placing strict stop-losses just above the $3,943 pivot zone.
Historically, sharp technical breaks below major ascending trendlines lead to a secondary capitulation leg before finding a durable floor. Market statistics show that when gold drops sharply below its 50-day moving average, relative strength index (RSI) readings frequently dip into deep oversold territory below 30. We view the current slide as a classic momentum expansion phase, where tactical short contracts remain favored until primary support is fully tested.
Trading Strategy Adjustment Near Support
As gold approaches the $3,700 target, we advise market participants to prepare for a potential stabilization or sharp mean-reversion rebound. Because the odds of a sustained breakdown below $3,700 remain low, traders should consider scaling out and locking in profits on short positions near this barrier. Position traders might also evaluate bullish call options or long derivative strategies around $3,700 to capture an expected relief rally.
We urge traders to keep leverage manageable, as oversold conditions can trigger sudden short-covering spikes ahead of upcoming economic events. Monitoring open interest in futures contracts will be critical over the next few weeks to confirm whether selling pressure is slowing near $3,700. Managing exposure with defined-risk option structures will help protect accounts against unexpected volatility shifts during this transition phase.
