On Monday, spot gold continued to drop, falling more than $100 intraday in a brutal selloff. After losing the key psychological level of $4,000, gold faces more tests this week. Investors believe some of the economic risks and geopolitical tensions that had supported precious metals have eased.

Last week, a blistering rally pushed prices to a record high above $4,380 per ounce, but gains then reversed as overbought signals emerged. Even so, supported by central bank purchases and currency-devaluation trades—as well as investors steering clear of sovereign debt and currencies to protect themselves from runaway budget deficits—gold is still up more than 50% so far this year.

This week is packed with rate decisions from major central banks: the Federal Reserve, the European Central Bank, and the Bank of Japan. Markets expect the Fed to cut by 25 basis points, while the ECB and BOJ are seen holding steady. Further monetary easing by these central banks could provide fresh support for non-yielding assets like gold.

Meanwhile, professional gold traders, brokers, and refiners have gathered in Japan for a conference hosted by the London Bullion Market Association. The event, which began last Sunday, has a record number of attendees; the increasingly fierce war for talent among gold investors is likely to be a hot topic.

The World Gold Council says central-bank demand is not as strong as it once was, and professional traders might welcome a deeper pullback. Some believe $3,500 per ounce would be a “healthy” level for the gold market—still relatively high.

In addition, a potential trade deal is buoying risk assets and pressuring gold, though any tariff reductions would give the Fed more room to cut rates further.

Market take:

On the H4 (4-hour) chart, gold is drifting lower within a range, and the MACD lines and histogram are starting to show bullish (bottom) divergence and convergence. Since a 25-basis-point cut has largely been priced in, investors are watching for any forward-looking remarks from Fed Chair Jerome Powell. Lower real rates should continue to support gold demand. The consensus is for a 25-bp Fed cut, so the market may not see major volatility around the FOMC meeting.