Why Did XAUUSD Drop Sharply in the Latest Session?
I dont see this decline as abnormal. It is more the result of several factors aligning at the same time.
First, large-scale profit taking. Since the beginning of 2025, gold has gained more than 70%. As price approached the 4.55x area a very strong psychological level institutional money began locking in profits. Funds often distribute positions in a concentrated manner to optimize liquidity, which is why price dropped quickly instead of correcting gradually.
Second, the short-term macro backdrop has turned less supportive. The USD has seen a technical rebound, while US Treasury yields remain elevated around 4.1%, increasing the opportunity cost of holding gold. That alone is enough to create pressure when price is already in an overbought state.
Third, thin year-end liquidity. During the December 3031 period, many funds have already closed their books. In such conditions, a single large sell order can push price much further than usual, making the move appear more aggressive than it actually is.
Finally, technical factors played a role. Price closed below the fast EMA, broke the short-term balance zone, and triggered stop-losses from trend-following long positions. This created a cascading sell effect that quickly dragged price down toward the 4.33x area.
The key takeaway: the larger structure remains intact. Price is still holding above the slower EMA and has not broken the H4 swing low around 4.28x4.30x. Therefore, this move should be seen as a sharp correction within an uptrend, not a trend reversal signal.