Gold prices rebounded after a sharp drop; how long will this recovery last?
2026-02-04 20:55:12
On Wednesday, February 4th, spot gold traded around $5060 in pre-market US trading. After a precipitous drop at the beginning of the week, briefly hitting a low of $4401.58, prices gradually recovered. This rebound is not due to a fundamental improvement in the market's fundamentals, but rather a technical correction following the easing of the extreme liquidity shock. The previous plunge triggered a large number of stop-loss orders and liquidation orders, leading to a sell-off; as this pressure of passive deleveraging eased, prices naturally rebounded quickly. Analysts believe that the current price action reflects more of a position rebalancing and bargain hunting than a confirmed trend reversal.
It's worth noting that the fluctuations between the low of 4401.58 and the high of 5596.33 in this round were extremely pronounced, indicating that market sentiment is still unstable. Currently, prices are repeatedly fluctuating around the $5000 mark, which is both a psychological support level and a concentrated area of cost for both bulls and bears. If gold prices can hold above $5000 and raise the lows of the pullback, the recovery may continue; conversely, if prices repeatedly fail to break through this level, they may fall back into a period of consolidation or even a further decline.
Despite the recent rebound in gold prices, the fundamental logic supporting its long-term strength has not fully returned. The core issue in the market remains the Federal Reserve's policy path—especially whether interest rates will remain high for an extended period. Monday's strong US manufacturing data, with new orders jumping to their highest level since 2022, while not immediately triggering a second plunge in gold prices, has sown the seeds of future problems: a robust economy suggests that inflationary pressures may be persistent, potentially pushing nominal and real interest rates higher again.
Holding gold offers no interest returns, and as interest rates rise, its "opportunity cost" increases, causing funds to flow more towards cash-like assets or short-duration bonds. Therefore, if subsequent employment and inflation data show the labor market overheating again, the Federal Reserve may postpone rate cuts or even consider further tightening, which would directly suppress gold prices.
The current rebound in gold prices is largely due to the corrective demand resulting from the extreme market conditions earlier in the season. With a large number of leveraged positions being forcibly liquidated, market vulnerability was temporarily released, making prices more susceptible to a rapid rebound. However, this does not mean the trend has restarted. Analysts point out that such corrections often lack sustained momentum and are more of a slow process of rebuilding market confidence.
From a technical perspective, the MACD shows a DIFF of 157.90, a DEA of 169.17, and a MACD value of -22.53, indicating that although momentum has recovered somewhat, it is still in a rebalancing phase after the pullback and has not yet formed a clear bullish signal. The RSI is 59.14, in the neutral to slightly bullish range, suggesting that there is still room for upward movement in the short term, but it is still far from a strong uptrend. The key resistance level remains in the 5500 area; if it cannot be effectively broken, the market is likely to turn into a wide-range fluctuation again.
Meanwhile, market divergence regarding medium-term targets is widening. One view maintains year-end targets of $5600/oz for gold and $133/oz for silver, but emphasizes a range-bound trading pattern. Another side is more optimistic, believing gold prices could still challenge $6000, arguing that previous declines have over-priced in some negative factors, and that physical and institutional demand is gradually showing support after the correction. However, both sides agree that a short-term rebound is possible, but the pace will be more volatile, and fluctuations are unlikely to cool down quickly.
Given the current complex situation, simply judging as "bullish" or "bearish" carries risks. Traders define the current phase as a "recovery consolidation after a sharp drop," rather than the starting point of a one-sided upward trend, focusing on the battle between bulls and bears around $5,000. Especially before and after important data releases, even minor changes in interest rate expectations can trigger sharp fluctuations; irrational market movements driven by emotions should be guarded against.
Traders are awaiting further clarity on key data such as non-farm payrolls and CPI before assessing whether conditions are ripe for a return to the current trend. Overall, gold has a foundation for a short-term recovery, but macroeconomic constraints remain significant. In the coming weeks and months, the market is more likely to exhibit a volatile trading pattern characterized by two-way fluctuations and frequent shifts in momentum.
It's worth noting that the fluctuations between the low of 4401.58 and the high of 5596.33 in this round were extremely pronounced, indicating that market sentiment is still unstable. Currently, prices are repeatedly fluctuating around the $5000 mark, which is both a psychological support level and a concentrated area of cost for both bulls and bears. If gold prices can hold above $5000 and raise the lows of the pullback, the recovery may continue; conversely, if prices repeatedly fail to break through this level, they may fall back into a period of consolidation or even a further decline.
The macroeconomic outlook remains unchanged: interest rates remain a "sword of Damocles."
Despite the recent rebound in gold prices, the fundamental logic supporting its long-term strength has not fully returned. The core issue in the market remains the Federal Reserve's policy path—especially whether interest rates will remain high for an extended period. Monday's strong US manufacturing data, with new orders jumping to their highest level since 2022, while not immediately triggering a second plunge in gold prices, has sown the seeds of future problems: a robust economy suggests that inflationary pressures may be persistent, potentially pushing nominal and real interest rates higher again.
Holding gold offers no interest returns, and as interest rates rise, its "opportunity cost" increases, causing funds to flow more towards cash-like assets or short-duration bonds. Therefore, if subsequent employment and inflation data show the labor market overheating again, the Federal Reserve may postpone rate cuts or even consider further tightening, which would directly suppress gold prices.
The truth behind the rebound: Is it a reversal or a "last gasp"?
The current rebound in gold prices is largely due to the corrective demand resulting from the extreme market conditions earlier in the season. With a large number of leveraged positions being forcibly liquidated, market vulnerability was temporarily released, making prices more susceptible to a rapid rebound. However, this does not mean the trend has restarted. Analysts point out that such corrections often lack sustained momentum and are more of a slow process of rebuilding market confidence.
From a technical perspective, the MACD shows a DIFF of 157.90, a DEA of 169.17, and a MACD value of -22.53, indicating that although momentum has recovered somewhat, it is still in a rebalancing phase after the pullback and has not yet formed a clear bullish signal. The RSI is 59.14, in the neutral to slightly bullish range, suggesting that there is still room for upward movement in the short term, but it is still far from a strong uptrend. The key resistance level remains in the 5500 area; if it cannot be effectively broken, the market is likely to turn into a wide-range fluctuation again.
Meanwhile, market divergence regarding medium-term targets is widening. One view maintains year-end targets of $5600/oz for gold and $133/oz for silver, but emphasizes a range-bound trading pattern. Another side is more optimistic, believing gold prices could still challenge $6000, arguing that previous declines have over-priced in some negative factors, and that physical and institutional demand is gradually showing support after the correction. However, both sides agree that a short-term rebound is possible, but the pace will be more volatile, and fluctuations are unlikely to cool down quickly.
Strategic Response: Don't rush to chase the rally; a volatile market tests patience even more.
Given the current complex situation, simply judging as "bullish" or "bearish" carries risks. Traders define the current phase as a "recovery consolidation after a sharp drop," rather than the starting point of a one-sided upward trend, focusing on the battle between bulls and bears around $5,000. Especially before and after important data releases, even minor changes in interest rate expectations can trigger sharp fluctuations; irrational market movements driven by emotions should be guarded against.
Traders are awaiting further clarity on key data such as non-farm payrolls and CPI before assessing whether conditions are ripe for a return to the current trend. Overall, gold has a foundation for a short-term recovery, but macroeconomic constraints remain significant. In the coming weeks and months, the market is more likely to exhibit a volatile trading pattern characterized by two-way fluctuations and frequent shifts in momentum.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
