As the tariff policies between China and the United States returned to the pre-“liberation” level overnight, the market’s risk aversion sentiment has significantly cooled down, and gold seems to have gradually lost its luster.

Since Trump announced the “reciprocal tariff” on April 2, gold has soared from a phased low of $2,980 to $3,500. Looking back at history, it took 12 years for the price of gold to climb from $1,000 (2008) to $2,000 (2020), and 5 years from $2,000 to $3,000 (April 2025), and less than a month from $3,000 to $3,500. It can be seen that gold is hitting every important milestone at a faster speed.

But asset prices cannot rise forever, just as market sentiment needs to be corrected and reversed after reaching extreme levels. When China and the United States reduced tariffs on each other and the geopolitical situation cooled down, the sentiment side underwent a fundamental change, and gold bulls lost the momentum to continue to push higher, while the stabilization and rebound of the US dollar put further pressure on gold prices.

In fact, the price of gold has turned from a unilateral upward trend to a high-level fluctuation in the past three weeks, and has always been more than 25% above the 200-day moving average, which usually means that the mean recap is approaching. Speculative long positions in gold (blue line in the figure below) have even sounded the alarm earlier, falling in 6 of the past 7 weeks, forming the largest deviation from the price of gold (yellow line) since 2020. After falling below $3,200 this week, gold formed a standard double-top structure, suggesting that the adjustment of gold prices may continue. It’s just that we don’t know how long this adjustment cycle will be.

Speculative long positions in gold futures vs. gold prices Source: CFTC, Forex.com

At this point, we have to compare the current trend of gold with that in 2011. Both have experienced an upward cycle that lasted for several years. Both were once more than 25% higher than the 200-day moving average. Both lost momentum after accelerating at the end and formed a top structure…

Gold in 2011 vs. 2025 Source: TradingView

It is worth noting that the current price of $3,200 is much higher than the $1,900 of that year. Therefore, according to the average true range (ATR) indicator, the average maximum fluctuation of gold prices in the past 14 days is around $80, which is undoubtedly at an all-time high, which also means that traders will face greater potential risks. If the macro environment stabilizes, this fluctuation is expected to return to normal levels.

XAUUSD 4 hours Source: TradingView, Forex.com

From the 4-hour level, after falling below the key support of $3,200, the gold price may fall to the rising trend line of 3,125 since the beginning of the year, and the short-selling target is the lower track of the channel at around $2,900.

However, although the uncertainty of tariff policy has been reduced, the market is no longer one-sidedly pessimistic about the economic outlook, but this does not mean that all hidden dangers have been eliminated. Trump’s unpredictability is one of them, and the most worrying thing is undoubtedly US debt! Faced with the huge amount of US debt maturing this year, on the one hand, the Federal Reserve refuses to cut interest rates quickly, and the 10-year US Treasury yield has exceeded 4.5%. On the other hand, after the role of the tariff card has been greatly reduced, the purchasing pressure of overseas buyers has also been reduced accordingly. If the US debt market “explodes”, gold may become one of the few assets that can hedge risks.

In addition, the Federal Reserve is in a cycle of interest rate cuts, and gold plays an irreplaceable role in the process of “de-dollarization”. Many investors are still optimistic about the long-term trend of gold.

Global central bank net gold purchases 2014-2025 Source: World Gold Council