Gold is facing one of the most critical technical tests since the bull market began in 2024. After experiencing a sharp sell-off triggered by overcrowded momentum trading, gold prices have retreated to near a steep trendline since September of last year and tested the 50-day moving average during a mini flash crash overnight.
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According to The Market Ear analysis, gold prices must stabilize around $4,600 (with a fluctuation of $50) to maintain their constructive market structure. The current decline is primarily due to excessive &#34;fear of missing out&#34; (FOMO) trading in the previous period and a lack of downside risk management, with the relative strength index (RSI) plummeting from 91 to 46, indicating that the market has rapidly shifted from extreme overbought to the lowest oversold level since August of last year.
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However, the fragility of the market structure remains concerning. Citigroup research points out that gold holders have accumulated paper profits of about $20 trillion over the past three years, while the capital inflow driving this round of increases is only about $1 trillion. This means that a mere 5% profit-taking would be enough to offset all global physical demand, and this enormous stock of profits hangs over gold prices like the &#34;Sword of Damocles.&#34;
Despite short-term support, institutions have become cautious about the medium-term outlook. Citigroup maintains a target price of $5,000 per ounce for the next 0 to 3 months but expects gold prices to fall back to $4,000 in 2027, with a potential decline of 20%, as geopolitical risks diminish in the second half of 2026 and the independence of the Federal Reserve is confirmed.
<h2>Key Technical Levels and Risk Management</h2>
From a technical perspective, gold is currently in a region that must be defended in the short term. The Market Ear notes that since the bull market began in 2024, gold prices have shown solid support and rebound ability at the 100-day moving average. The current focus is on the $4,600 level; if gold prices are forced to break below this level, the next key observation point will shift down to around $4,250 near the 100-day moving average.
Market participants' sentiment is being tested. Many traders hope to exit flat in the latest sell-off, but this exposes the lack of a true risk management framework among most participants. Analysis indicates that when trading strategies fail, many default to &#34;hope,&#34; whereas the primary focus in trading should be to avoid significant drawdowns rather than fixating on the correctness of direction. Additionally, the subsequent trend of Shanghai gold futures will be a closely watched indicator.
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<h2>Trillion-Dollar Hot Money and Market Structural Imbalance</h2>
According to a previous article by Wall Street Insight, Citigroup's research reveals the current extreme structural imbalance in the gold market. The core driving force behind the recent rise in gold prices from $2,500 to $5,100 is the capital allocation by investors, excluding central banks, amounting to approximately $1 trillion. In contrast, the physical gold market is too small relative to the total global wealth, making it fundamentally incapable of accommodating large-scale asset allocation shifts.
Looking ahead to the medium term, several geopolitical and economic risk factors supporting gold prices are expected to ease in the second half of 2026. Citigroup's assessment suggests that about half of the risk factors supporting gold allocation will disappear within the year. The bank forecasts that gold prices will reach $5,000 in the first quarter of 2026, followed by a quarterly decline: $4,800 in the second quarter, $4,400 in the third quarter, and $4,200 in the fourth quarter, with an annual average expected to be $4,600.
In the scenario analysis, Citigroup believes the baseline scenario (60% probability) is for gold prices to fall to $4,000 per ounce by 2027. In contrast, the bullish scenario (20% probability) sees prices rising to $6,000, while the bearish scenario (20% probability) could see gold prices drop to $3,000. Additionally, historical experience indicates that during significant corrections in the U.S. stock market caused by an AI bubble burst or economic recession, gold often declines first, adding an extra layer of risk consideration for investors

After experiencing a sharp correction, gold prices are now close to the first key support level—around $4,600 per ounce (with a fluctuation of $50). Whether this level holds is crucial for maintaining the bullish structure. However, the main risk facing the market is that a mere 5% pullback from the massive profit-taking inventory (approximately $20 trillion) would be enough to offset global physical demand. As a result, institutions like Citigroup are turning cautious in the medium term, predicting that gold prices may fall to $4,000 by 2027

- Gold is experiencing a critical technical test since the bull market began in 2024, retreating to a steep trendline and testing the 50-day moving average.  
- Analysts highlight a need for the price to stabilize around $4,600 to maintain a constructive market structure, with recent price drops attributed to excessive FOMO trading and poor risk management.  
- Citigroup suggests the geopolitical risks supporting gold may diminish by the second half of 2026, predicting a gradual decline in gold prices to around $4,000 by 2027, contingent on various market factors.

Gold is approaching the first key support level