FX.co ★ XAU/USD, GOLD

Gold (XAU/USD) is having one of its worst days in many weeks. The commodity slides almost 4% on Monday and is trading near $4,120 at the time of writing, having dipped below $4,200 for the first time since early August. The drop is noteworthy, but $4,200 probably won't define gold's future path. The key point may be lower. Bulls face little incentive to act right now. Momentum is negative, US yields remain near multi-year highs, and upcoming US macroeconomic numbers may alter Fed projections. Gold's slide below $4,200 is noteworthy because of the level's psychological significance. At the same time, it can be regarded as another leg lower of the correction from the August high around $4,700. Still, the daily chart suggests the range below the currently tested levels may prove more significant than the breakout itself. Gold has formed several lows in the $4,000 range recently. Notably, the $3,900-$4,000 range coincides with the June-July lows and the former major reversal zone of October-November 2025. Societe Generale takes a comparable approach. According to the bank's experts, support sits near $4,095; however, the key level is the June-July lows near $3,960-$3,940, which gold should test. This makes the bearish move through the $4,200 level look different. While sellers have taken control over short-term momentum, they have not won the fight over the bigger picture. Thus, even if price falls to $4,000, it will still not be a capitulation, but merely a test of real demand. However, this detail should not cloud the current extent of the decline. Gold remains in a major bearish setup since touching an all-time peak at $5,600 in January. Each successive peak is forming a lower top, while the rally from August topped out at $4,700, just below the falling top line on the daily chart. Moreover, gold is trading below the 50-day, 100-day, and 200-day moving averages, with no ability to form a new high above the 200-day moving average. In other words, even if one expects buyers to return at $4,000-$3,900, that does not mean this level has to be respected. A drop below $3,900 would mean the market is moving toward the lower edge of the descending wedge, where one can expect the last, and possibly significant, level of support near $3,800. The effective decision-making range has therefore widened to about $4,000-$3,800. Below this range, it becomes increasingly hard to argue that the drop was merely a test.