Gold Correction Hits $4,700, Analysts See Limits

Gold prices have stalled below $4,700 after a recent rally, but analysts believe this correction has limits. The precious metal's price corrected from $4,700 following a 5% surge that encountered long-term resistance. Wednesday's PCE inflation report is expected to be closely watched, and a speech by Warsh at Jackson Hole on Friday may have more significance.

The trend remains up, with value-seekers potentially feeling comfortable stepping in on a pullback into the 200-day moving average. However, sellers need either the PCE or Warsh's speech to rebuild the rate case for gold prices to continue downward. JPMorgan cut its near-term fourth-quarter target to $4,500 in early July, but spot gold has already moved above that level.

The spread between JPMorgan's targets for $4,500 and $6,000 indicates how much the bond market is driving the range right now. Gold stalled just under the long-term 50% resistance level and is in a position to form a closing price reversal top. The dollar remains at a three-month low, keeping the trend up.