FxPro Market Review: Gold: Corrections are the driving force behind economic growth.

Gold prices fell more than 1% on Can Foreign Exchange Trading Be Used as Financial ManagementTuesday, marking the first daily decline after nine consecutive days of increases, of which six days reached all-time highs.

Alex Kuptsikevich, a senior analyst at FxPro, noted: The signs of consolidation on Monday and Tuesday were evident, with the market accelerating a moderate decline as the US inflation data was released. Although the sell-off triggered by this news was very brief for risk assets, the sell-off in gold was more enduring but did not exceed a short-term fix period.

Many factors suggest that this is a corrective pullback rather than a reversal.

Firstly, the sell-off ended near $2150, where consolidation occurred before the latest upward momentum, during the last weekend. This level also coincides with the 76.4% Fibonacci retracement of the $175 increase over the past two weeks when gold broke out of a bearish trading range. This shallow corrective pullback is a sign of a strong bull market.

Secondly, the weakness in gold was not supported by a general decline in risk appetite. Bitcoin briefly fell 6.5% in Tuesday's sell-off but reached an all-time high by Wednesday morning. As of writing this analysis, the dollar index has returned all gains brought by the CPI release. The S&P 500 index closed at a new high on Tuesday, and European stock indices further entered the all-time high territory on Wednesday. The correlation between European indices and gold has become very high since the second half of December.

Additionally, we noticed that copper prices broke through resistance levels of several months, and oil prices rose, indicating an increase in risk appetite, which is also beneficial to gold.

All these suggest that we might have seen a swift rebound for the bulls yesterday, enabling them to accumulate liquidity, — providing fuel for further buying and revisiting historical highs.

Risk Warning and Disclaimer

The market carries risks, and investment should be cautious. This article does not constitute personal investment advice and has not taken into account individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investing based on this is at one's own responsibility.

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