TradingKey - Due to signs of easing geopolitical risks in the Middle East, international gold prices (XAUUSD) quickly rebounded after previously falling to the $4,100 level, once rising to touch the $4,600 level, but faced significant pressure near the highs, showing signs of a short-term pullback.
The market generally believes that the rapid increase in prices, combined with a preference for liquidity and some funds concentrating on cashing out, are the main reasons for the recent short-term correction in gold prices.
<h2>Why did gold prices drop significantly and then rebound sharply?</h2>
From the market performance, spot gold (XAUUSD) has not yet shown effective key support levels after the rapid rebound, and selling pressure is gradually increasing above. The rebound in gold prices is mainly driven by &#34;persistent geopolitical risks and cooling inflation expectations.&#34;
On one hand, although Donald Trump has signaled a phased easing, the market has not fully priced in the end of the conflict, and geopolitical uncertainty still provides bottom support for gold; on the other hand, as energy prices have surged and then retreated, market concerns about further uncontrolled inflation have eased, and expectations for real interest rates have declined, creating conditions for gold to rebound.
Additionally, from the perspective of capital behavior, short-term trend funds and CTA strategies concentrated on increasing positions after gold prices broke through key levels, but as prices failed to maintain an upward trend, some funds quickly chose to take profits and exit, leading to a pullback in gold prices at high levels.
<h2>Gold under short-term pressure, but the logic remains unchanged and is delayed in effect</h2>
Despite the short-term pressure, the fundamental support logic for gold in the medium to long term has not changed.
In the context of ongoing global macro uncertainty, fluctuations in real interest rates, and recurring geopolitical situations, gold still holds value as a safe-haven asset. The panic sell-off has prompted short-term funds to clear out, which may lead to gold moving further in the long term.
UBS analyst Wayne Gordon and his team stated: &#34;As the market adjusts to expectations of higher interest rates and a strong dollar (both short-term obstacles to rising gold prices), gold's role as a store of value in the early cycle has come under pressure. However, this is not a failure of gold's safe-haven performance, but rather a delay.&#34;
Historically, not all geopolitical conflicts lead to an increase in safe-haven assets, and in the early stages of a conflict, gold prices may exhibit a &#34;buy the expectation, sell the fact&#34; opposite trend. Despite the existence of safe-haven logic, short-term events can prompt funds to remain cautious, and the outbreak of geopolitical conflicts often leads to increased demand for liquidity in the market, causing gold prices to typically face pressure and consolidate or even decline.
Suki Cooper, head of global commodities research at Standard Chartered Bank, pointed out that given the significant rise in gold and silver prices over the past two years, some investors choose to cash out liquidity to offset losses in other assets, such as additional margin requirements triggered by stock market declines.
In the medium to long term, the safe-haven logic remains the fundamental support for precious metals, while short-term adjustments may clear out speculative funds in the short term, especially for silver (XAGUSD), which has limited overall capacity; its safe-haven logic often lacks consensus and is easily affected by market emotional sell-offs and stretches

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International gold prices reached $4,600 due to the easing of geopolitical risks in the Middle East, but subsequently came under pressure and fell back. The market believes that the short-term correction in gold prices is mainly due to the rapid increase and profit-taking. Despite the short-term pressure, UBS analysts point out that the medium to long-term fundamental support logic for gold remains unchanged, and it still has hedging value. The market's easing concerns about inflation and expectations of falling real interest rates create conditions for a rebound in gold. Analysts state that gold's value preservation function is under pressure as it adapts to high interest rates and a strong dollar, but it has not become ineffective

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Gold prices came under pressure after reaching $4,600, UBS: The logic of hedging has not changed, just delayed in effect