Gold collapses from the $4,200 level on Wednesday after a brief rally, testing crucial $4,000 support. Analysts warn sustained weakness could trigger a selloff, noting $4,000’s psychological and Fibonacci importance amid ongoing volatility and shifting sentiment.

• Gold initially did try to rally a bit during the trading session here on Wednesday but collapsed right at the $4,200 level.
• The $4,200 level is an area that had been supported for about 15 minutes there, and now we've collapsed.
• The question here is, can we hold on to $4,000? Because if we don't, I suspect the stampede starts.
   

Sooner or Later…Gravity Matters

I've been saying for a while now that this type of move can't go on forever. And my experience has told me that once you get to a certain point, you just can't get involved, or at least not for a bigger move. All things being equal, this is a market that I think continues to see a lot of volatility. And if we start to see this as a bearish market, wow, that could change a lot of things.
 

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The U.S. dollar has strengthened a bit, but don't get sucked into that whole negative dollar–strong gold argument. That's not always the case — it just depends on what's going on. I'm watching $4,000 very closely here because it is the 38.2% Fibonacci retracement level. It's a large, round, psychologically significant figure, and it's an area where I would anticipate a large number of traders and options barriers right around that vicinity.
 

So, we'll have to wait and see. Anyway, it's difficult to imagine that the market could simply go straight up in the air forever, and I think gravity is a real thing. I also think a lot of market participants, unfortunately, have learned that as well. At this point, if we give up $4000 to the downside, things will get very interesting to say the least.

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