After more than two months of continuous gains rising over $1,000 per ounce, one of the strongest rallies in history — the gold market has entered a state of extreme overbought conditions. The nearly $200 drop on Friday (October 17) reflects a combination of both fundamental and psychological factors. So, is this the beginning of a deeper correction, or merely a short-term pause before another explosive move upward?

Key Drivers Behind the Pullback

Gold prices unexpectedly plunged on Friday after reaching a record high of $4,380 per ounce, pressured by a rebound in the U.S. dollar and comments from U.S. President Donald Trump.

Trump stated that the high tariffs the U.S. has threatened to impose on China could not be sustained for long, while also confirming an upcoming meeting with Chinese President Xi Jinping — a move that somewhat eased market concerns over escalating U.S.–China trade tensions.

Trump’s more conciliatory tone, following his earlier 100% tariff announcement, has helped cool down the overheated gold rally. As a result, the safe-haven demand for gold has temporarily subsided, prompting some investors to reduce their gold holdings.

GOLD REMAINS IN A MAJOR UPTREND

Despite a recent correction of nearly $200 per ounce, it’s important to note that gold has still risen more than 65% since the beginning of 2025, supported by a series of strong fundamental factors:

• Escalating geopolitical tensions

• Aggressive buying by central banks

• The weakening U.S. dollar

• Massive capital inflows into gold ETFs

• And expectations that the Federal Reserve will soon cut interest rates

Wave Analysis: A Short-Term Correction Phase

From a wave structure perspective, gold has completed the (t2) white wave and is now entering a corrective phase from (t2) to (l2) white. During this stage, price movements typically form one of two common corrective patterns: abc or abcde.
Regardless of the specific pattern, this should still be viewed as a healthy consolidation, helping to reinforce gold’s long-term bullish trend.

However, if the price falls below the $3,940 per ounce zone, the outlook will shift — gold could then enter a medium-term correction cycle, requiring investors to reassess the broader trend

Market Sentiment

During periods when gold prices reach new highs, psychological divergence often emerges among investors: one group becomes anxious, fearing a “historic peak,” while another views the correction phase as a buying opportunity.

Data from Kitco and Reuters indicate that retail investors continue to expect gold prices to rise further in the medium term, even though institutional players have turned slightly more cautious in the short run.

Short-Term Correction – The Foundation for Gold’s Next Bullish Cycle

In essence, the sharp drop on October 17 is not a sign of a trend reversal, but rather a necessary technical correction to consolidate the foundation for a new bullish cycle.

As profit-taking pressure fades, gold is likely to continue its journey toward the $4,500/oz zone in the near future, before the market establishes a new equilibrium range.

For medium- and long-term investors, this is not a signal to exit the market, but a moment to observe, rebalance positions, and get ready for the next upward phase.

Every correction is an opportunity to align yourself with the broader trend — don’t miss the next big wave!

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