Gold News: XAU/USD Slumps 7% From Highs — Is the 50-Day Moving Average the New Value?

XAU/USD Falls Below $4100 as Dollar Strength, Profit-Taking Extend Pullback

Spot gold (XAU/USD) is under pressure for a second straight session, with prices down over 2% on Wednesday after Tuesday’s 5.3% drop — the steepest daily decline since 2020. The retreat follows Monday’s record high of $4381.21 and comes as traders aggressively unwind long positions, with a firmer U.S. dollar accelerating the downside.

At 12:06 GMT, XAU/USD is trading $4038.00, down $87.27 or -2.12%.

Profit-Taking and Dollar Strength Cap Gold Rally

Tuesday’s reversal was driven by heavy profit-taking after an extended multi-week run that saw gold gain 54% year-to-date. That rally, fueled by Fed rate cut bets, safe-haven demand, and strong ETF inflows, pushed gold deep into technically overbought territory.

According to ActivTrades’ Ricardo Evangelista, “many traders closed positions in order to lock in profits” as overextension triggered a sharp reversal.

The U.S. dollar index (DXY) rose 0.2% on Wednesday to a one-week high, reinforcing downside pressure on dollar-denominated bullion. With no immediate safe-haven catalyst and dollar strength back in play, momentum continues to favor sellers in the near term.

Support Levels Eyed at $3846.50 and $3724.35

From a retracement perspective, the August 20 main bottom at $3311.56 to the October 20 top at $4381.44 marks $3846.50 as a 50% retracement — a key level that many traders are eyeing as the next potential support zone. Others are targeting the 50-day moving average at $3724.35 as a more significant downside objective.

Near-term, gold has broken through minor pivot levels at $4162.93 and $4100.43, turning both into new resistance. The break below these levels suggests the current pullback has further room to run unless buyers step in at value areas.

Fed Expectations and CPI Data Remain in Focus

All eyes now turn to Friday’s U.S. Consumer Price Index (CPI) data, which could heavily influence short-term direction. A soft inflation read would strengthen the case for a Fed rate cut next week — a move supported by a Reuters economist poll forecasting 25 basis point cuts in both November and December. As a non-yielding asset, gold remains sensitive to interest rate expectations.

Gold Market Outlook: Bearish Near-Term Bias Until Key Support Tested

Right now, the tone is bearish, with the downside in motion and no strong bid yet. We’re likely to see this leg lower continue toward a major 50% level at $3846.50, and possibly the 50-day moving average at $3724.35, before value buying returns.

A short-covering bounce is possible, but unless bulls can reclaim $4100.43 and hold it, the bias remains tilted toward further selling pressure. CPI on Friday is the next key risk event — until then, traders should expect weakness to persist.

More Information in our Economic Calendar.