Gold Price Correction | Will XAUUSD Hold or Reverse the Uptrend?

Gold has started a correction, breaking through the support zone of 2630 - 2625 yesterday. With this breach, there is a potential for prices to decline further towards the next support level of 2603 - 2594. If this zone is reached, traders may consider long trades with targets set at 2640 and 2685. However, if the price breaks through the support today, we could see the short-term uptrend reverse, opening the possibility for short trades aimed at the lower target zone of 2528 - 2512.

For decades, gold has been viewed as a safe-haven asset, providing investors with stability during times of global turmoil. But this perception is now being challenged as gold reacts to the escalating geopolitical conflict in the Middle East. In a move reminiscent of risky assets, XAUUSD collapsed alongside US stock indices, raising questions about its resilience as a defensive investment.

During the 2008-2009 economic crisis and the COVID-19 pandemic, the global financial system saw an influx of cheap liquidity. At that time, gold was widely used as a defensive strategy, safeguarding wealth against market volatility. However, the conflict in Ukraine and the ongoing trend of de-dollarization have repositioned gold as a potential source of growth. The recent FOMO effect pushed XAUUSD quotes above $2,600 per ounce, reflecting significant gains compared to last year’s levels.

What’s even more telling is the unusual correlation between gold and oil prices, highlighting a shift in market sentiment. Gold has begun to behave more like a risky asset rather than a traditional haven. This is especially evident from its recent surge, which coincided with Iran's missile attacks on Israel, pushing gold to its highest level since 2021. The changing correlation between gold and global economic risk signals a new dynamic, where global risk appetite drives demand for the precious metal in ways not seen before.