GOLD – Starting to Shine on a Short Squeeze or a New Uptrend?

Markets have entered a relatively calm period, with U.S. equity indices trading near all-time highs while GOLD remains close to its lowest levels in several months. At the same time, bond yields remain near multi-year highs, continuing to create a challenging environment for precious metals.

Market expectations remain sharply divided.

A significant part of the market continues to expect a correction — or even a more substantial sell-off — in risk assets. On the other side, equity bulls are looking toward the upcoming earnings season for another potential catalyst to push U.S. indices higher.

Who will be right?

The next few weeks could provide a clearer indication of the broader market direction and determine whether we see another melt-up in risk assets or the beginning of a more meaningful correction.

Why GOLD May Look More Attractive Than Equities

From a relative risk/reward perspective, GOLD may now be becoming increasingly interesting compared with U.S. equities.

GOLD has already been through a meaningful correction, while the negative impact of elevated bond yields appears to be largely reflected in its current price.

U.S. equity indices, meanwhile, remain close to record levels. This leaves them potentially more exposed to a correction if earnings disappoint, yields remain elevated, or broader risk sentiment deteriorates.

In simple terms, GOLD has already experienced its correction, while equities may still have theirs ahead.

This creates a potentially more attractive risk/reward profile for GOLD compared with equities at current levels.

It does not necessarily mean that a new bullish trend in GOLD has already started. However, the current setup creates the possibility of a short squeeze, followed potentially by the early stages of a more constructive bullish recovery.

For now, this bullish scenario should still be treated with caution, particularly while bond yields remain elevated.

GOLD / XAUUSD — Technical Levels

Support:

• 4,150
• 4,100–4,120

Major resistance:

• 4,500 and above

Holding above the 4,100–4,150 support area could provide a base for further recovery.

A sustained move toward and eventually above 4,500 could materially strengthen the bullish technical picture and increase the probability that the move is developing into something more significant than simply a short squeeze.

On the other hand, a clear break below the 4,100–4,120 support zone would put the bullish recovery scenario under pressure.

By Born2trade market research department

Risk Disclaimer: All research and/or forecasts above reflect the author's personal opinion and cannot be treated as trading advice. Born2trade is not responsible for any trading results based on any information in this article. Trading Forex and CFDs carries a high level of risk to your capital. You may lose all of your invested funds. Forex and CFD trading may not be suitable for all investors. Please ensure that you fully understand the risks involved and, if necessary, seek independent advice.