Gold Price Forecast: XAU/USD Screams for Correction After Surging Past $3,650

Gold continues its relentless climb Tuesday, smashing through to a fresh all-time high above $3,650. I’ve watched this rally with increasing skepticism - the yellow metal has surged an astonishing 10% since August 20, and frankly, it’s looking dangerously overheated.

The market’s obsession with today’s BLS Benchmark Nonfarm Payrolls Revision is feeding this frenzy. Whispers about a potential 800,000 job cut in the figures have hammered the Dollar, sending investors scrambling for safe havens. Everyone’s betting the Fed will have no choice but to slash rates by 50 basis points next week.

But I can’t ignore the warning signs flashing across my charts. Looking at the 4-hour timeframe, everything screams “correction ahead.” The RSI hovers near 80 with a bearish divergence that practically begs sellers to step in. This rally can’t sustain itself much longer without some healthy pullback.

Resistance sits at the day’s high of $3,658, with the 265.8% retracement of last week’s brief reversal pointing to $3,690 before the psychological $3,700 barrier. When (not if) the reversal comes, look for support at $3,630, followed by more substantial floors at $3,580 and $3,515.

I’ve seen this movie before. Central banks have been gorging on gold - adding a record 1,136 tonnes worth roughly $70 billion in 2022 alone. Emerging markets like China, India, and Turkey are particularly aggressive buyers, desperately diversifying away from the dollar.

Gold’s inverse relationship with both the greenback and risk assets means this rally has been perfectly positioned. The weaker dollar combined with geopolitical jitters creates the ideal environment for gold bugs. But markets don’t move in straight lines forever, and this meteoric rise has all the hallmarks of a rally that’s gone too far, too fast.

When something looks too good to be true in these markets, it usually is. Don’t get caught holding the bag when gravity inevitably reasserts itself.