Gold Prices Retreat After Hitting Record High Amid Profit-Taking

On Wednesday, July 17, spot gold experienced a sharp decline during the New York session, dropping more than $30 from its recent historical high and approaching the $2,450 per ounce mark. Analysts attribute this pullback to profit-taking by investors, despite the weakening dollar and declining U.S. bond yields.

Earlier in the session, gold prices surged to $2,483.69 per ounce, a record high, driven by optimism surrounding a potential Federal Reserve interest rate cut in September and increased demand for gold due to the weakening dollar. However, this rally was short-lived as investors capitalized on the high prices to lock in gains.

David Meger, Director of Alternative Investment and Trading at High Ridge Futures, commented, "The market believes that the timing of the Fed's interest rate cut is approaching. Expectations of declining U.S. bond yields and a softer dollar have fueled this rally in gold."

Fed officials have increasingly expressed confidence that inflation will return to the Fed's target, bolstered by higher-than-expected data earlier this year. On Wednesday, Fed Governor Christopher Waller mentioned that while the Fed is nearing the point of cutting interest rates, economic uncertainties make the timing of such actions unclear.

According to the CME's "Fed Watch Tool," there is a 98% probability that the Fed will cut interest rates in September.

Despite the initial surge, spot gold fell to a low of $2,451.42 per ounce before closing at $2,458.54 per ounce, down $10.16 or 0.41%.

FXStreet analyst Christian Borjon Valencia noted that profit-taking led to the sharp retreat after gold reached a record high of $2,483 per ounce. The U.S. dollar index dropped 0.49% to 103.72, its lowest level since March 21, 2024, while U.S. Treasury yields also declined, with the 10-year bond yield falling nearly 1.5 basis points to 4.14%.

Gold Trading Outlook

Valencia suggests that the upward trend in gold prices is likely to continue, although a brief pause in buying is expected after the recent highs. The Relative Strength Index (RSI) indicates that momentum remains in favor of gold buyers, albeit slightly lower.

If gold resumes its uptrend, the first resistance level would be the all-time high of $2,483 per ounce. Breaking above this level could push prices to $2,490 per ounce, followed by the psychological barrier of $2,500 per ounce.

Conversely, if gold falls below $2,450 per ounce, the first support level would be $2,400 per ounce, with the next level at the July 5 high of $2,392 per ounce. A fall below these levels could extend the downtrend to $2,350 per ounce.

Economies.com warned on Wednesday that gold prices face bearish pressure and could test the key support at $2,450 per ounce. A continued downtrend below this level could negate the recent bullish forecasts and push gold prices further down.

For the bullish trend to resume, Economies.com suggests that gold needs to consolidate above $2,450 per ounce, with $2,500 per ounce as the next major target.