Gold continued its decline in Asian trading on Wednesday, hitting an intraday low of around $4,000 an ounce, following a sharp one-day drop of more than 6% on Tuesday, the biggest intraday drop in more than a decade.

Short-term profit-taking and overbought conditions indicated by technical indicators were the main factors contributing to the increased selling pressure. Gold prices have risen about 55% this year amid a long-term rally, closing higher for nine consecutive weeks, driven by increased central bank holdings, ETF inflows, and safe-haven demand.

The recent easing of trade concerns and a rebound in the US dollar have led investors to lock in profits.


Expert opinion: Nicholas Frappell (head of global institutional markets at ABC Refinery) said: "Most investors are holding positions that are profitable, so it is normal to reduce positions at the right time."

Expectations of Federal Reserve policy are also a key factor affecting gold. The market had previously bet on at least one significant interest rate cut before the end of the year, stimulating gold's rise.

However, as risk sentiment subsided and policy expectations were fine-tuned, some funds chose to take profits and exit, further amplifying the extent of the correction.

Institutional view: According to market research, Citigroup has adjusted its gold rating from overweight to neutral and expects prices to consolidate around $4,000 per ounce in the short term.

Silver also fell under pressure on Tuesday, falling more than 8% after the London market experienced a historic squeeze, with prices breaking through the record high in 1980. The decline in silver is seen as a synchronized adjustment effect.

The daily chart shows that gold is currently in a correction, with key support at $3,950/oz and secondary support at $3,900/oz. Resistance levels are at $4,100/oz and $4,150/oz.

The short-term technical indicator, the MACD, has shown a top divergence, while the RSI has retreated from overbought territory to around 70. Overall, the daily chart suggests a short-term correction, but the medium-term bullish trend remains intact. A break below the $3,950 support level would trigger the risk of a further pullback.


Editor's opinion:

Gold's pullback is primarily due to profit-taking and a normal correction due to technical overbought conditions. Short-term fluctuations will not change the long-term bullish trend. Focus on the stability of the $3,950-4,000 support range.

If trade concerns continue to ease or the Federal Reserve signals a more accommodative policy, gold is expected to continue its rebound. Silver will decline in the short term in tandem with gold, but will still be highly volatile.