Gold: Overbought Positions Could Trigger Selling

Gold is making headlines for its relentless climb to record highs, but this surge is precarious. The main argument here is that the current rise in gold prices, fueled by euphoria and leveraged bets, could swiftly reverse into panic selling if key support at $4,291 fails. In this high-stakes environment, even a small slip could trigger a cascade of selling—and investors should be braced for sudden shocks.

Undoubtedly, gold futures are printing fresh record highs every day, despite finding resistance at every upward move. Meanwhile, technical indicators, such as the relative strength index (RSI) and the MACD, indicate that gold is in “overbought” territory, suggesting the futures are near a steep slide. But the strong upward trend continues to attract a large number of buyers, some of whom may have used high leverage to increase their exposure.

I anticipate that such a situation has extended prevailing skepticism over the reliability of every move as even a piece of negative news flow could wash this house of cards in one wave up to push the gold futures to unexpected low levels, which look only imaginary while the futures are trying to break a record low, tested by the gold futures on Thursday at $4392.29.


On Friday, gold futures found significant selling pressure, soon they tested a high at $4390.40 which pushed the futures to test the day’s low at $4291.73 before bouncing back to $4388.73, indicating that the strong selling pressure could continue to extend on Friday as the news flow till now not in favor of the bulls who are only over excited about the expected more rate cuts by the Federal Reserve before the end of this year.

In such indecisive scenario, I anticipate that if the gold futures find a breakdown below the immediate support at $4267, next support at the 9 DMA at $4143 could be the next target for the big bears who are loading fresh shorts at $4392 with a stop loss at $4538.74 for a target at $3713.61 up to Nov. 6, when the president Trump will present in Supreme Court.

Undoubtedly, investors will constantly have a vigilant eye over the developments on this front while the U.S. is going to enter the 17th day of government shutdown, impacting economic data releases, and the US budget deficit has slipped to $1.775 trillion in fiscal year 2025, down $41 billion from the prior fiscal year, the Treasury Department said Thursday.

On the other hand, President Donald Trump will meet tomorrow with Ukrainian President Volodymyr Zelensky at the White House. Today, he spoke with President Vladimir Putin and announced, “He will meet with the Russian leader in Hungary within two weeks or so.

Disclaimer: Readers are advised to take any position at their own risk; this analysis is based only on observations.