Gold Rebounds After 8% Drop; Bullish Signals Emerge
Gold (XAU/USD): Bullish Reversal Emerges After Sharp 8% Correction
Gold (XAU/USD) has seen intense volatility over the past few sessions, with rapid swings in both directions. After sliding 1.7% on Friday, 17 October 2025, the yellow metal rebounded strongly on Monday, 20 October 2025, climbing 2.4% to reach a record high of US$4,381.
However, the rally was short-lived. On Tuesday, 21 October 2025, Gold tumbled as much as 6.3% intraday before paring some losses to close at US$4,125, still down 5.3% for the day — marking its worst single-session decline since August 2020.
Short-Term Pressure, Long-Term Uptrend
The steep drop was likely triggered by stop-loss orders from short-term leveraged long positions, following weeks of momentum buying since the bullish breakout on 29 August 2025 from a four-month Ascending Triangle pattern. That breakout fueled a strong impulsive rally, but the recent pullback suggests short-term profit-taking and a shakeout of weak longs.
Despite the correction, both technical signals and macro fundamentals still support Gold’s broader medium- to long-term uptrend.
Key Technical Observations
- Price Action: Gold has corrected 8.6% from its all-time high of US$4,381 to a recent low of US$4,004 (as of Wednesday, 22 October 2025).
- Momentum Indicator: The hourly RSI plunged to an oversold level of 19.61, flashing a bullish divergence, which often precedes short-term rebounds.
- Candlestick Patterns: On the hourly chart, Gold has formed a bullish “Hammer” candlestick during the Asian session after retesting its rising 20-day moving average. A potential daily “Hammer” formation further reinforces signs of bearish exhaustion and short-term capitulation.
Together, these signals suggest that a short-term bullish reversal may be underway, even as volatility remains elevated.
