(Kitco News) - With markets closed on Friday for the Easter long weekend, investors took some profits off the table on Thursday after gold reached a new record high above $3,350 an ounce. And while gold continues to look overbought, some analysts have said that the market remains in a solid uptrend.

Despite the selling pressure, gold has held solid support around $3,300. Spot gold last traded at $3,316.90 an ounce, up nearly 2.5% for the week.

David Morrison, Senior Market Analyst at Trade Nation, described gold’s price action this week, including Wednesday’s $100 rally, as a blowoff top.

“Gold has rallied 13%, or $360, in the space of a week. Therefore, investors shouldn’t be surprised that prices are pulling back now. Gold also looks very overbought, with its daily MACD hitting levels last seen in April 2011, just before the last peak in prices. This doesn't mean it can't rally further from here, but buyers should be cautious at current levels,” he said.

Gold’s resilience comes as the U.S. dollar is set to end the week at a three-year low of 99.49 points.

Christopher Vecchio, Head of Futures & Forex at Tastylive.com, said that gold should continue to benefit from further U.S. dollar weakness. While the dollar is not expected to lose its reserve currency status anytime soon, Vecchio said that President Donald Trump’s erratic trade policies have weakened America’s standing in the global marketplace.

“ We're stepping back from Pax Americana to America First, which comes with a very different set of rules. There is no  other currency that can fill the void as a reserve currency, so we're kind of stuck with the dollar, but we're going to need something else. And that something else is gold,” he said.

Currency analysts at Brown Brothers Harriman also expect to see further U.S. dollar weakness, which will continue to support gold’s unprecedented rally.

“We continue to believe that much of the recent dollar weakness is due to a growing loss of confidence in U.S. policymakers as well as the negative impact of policy uncertainty on the U.S. economy. As such, we expect continued dollar weakness and view any dollar recoveries as quite fragile, no matter how the U.S. data comes in,” said Win Thin, Global Head of Currency Strategy, in a note on Friday.

In this environment, Vecchio said that he continues to view any dip in gold as a buying opportunity.

However, the problem investors face in the near term is determining where gold prices should be amid this unprecedented momentum. Lukman Otunuga, Senior Research Analyst at FXTM, noted that gold’s rally above $3,350 has pushed prices up 28% for the year, outpacing last year’s 24% rally.

“Gold continues to shine due to global recession fears with US-China trade tensions drawing investors toward the precious metal's safe embrace,” he said. “However, with prices heavily overbought, a technical correction could be imminent before gold pushes higher. Depending on the intensity of the correction, prices may slip toward $3250, $3140 with the psychological $3000 level acting as a significant support. If $3300 proves to be reliable support, prices may push toward the next psychological level at $3400 and beyond.”

Ole Hansen, Head of Commodity Strategy at Saxo Bank, said he sees potential for a significant correction in gold; however, he doesn't expect that to happen next week.

“Gold will eventually pause and experience a $200-$300 correction, but that time is not now with so many unanswered questions out there, exacerbated by Trump’s latest attack on Powell, potentially raising the bond market risk a notch,” he said.

On Thursday, President Donald Trump added more uncertainty to the markets by complaining about Federal Reserve Chair Jerome Powell and the central bank’s monetary policy stance. On Wednesday, in a speech at the Economic Club of Chicago, Powell maintained his neutral stance while focusing on the growing inflation threat even as risks to economic activity increase.

“Jerome Powell of the Fed, who is always TOO LATE AND WRONG, yesterday issued a report which was another, and typical, complete ‘mess!’ Trump wrote in a comment on social media. “Powell’s termination cannot come fast enough!”

The Fed’s stance contrasts with the European Central Bank which cut interest rates on Thursday and signaled more cuts to come as inflation pressures continue to ease.

Fawad Razaqzada, Market Analyst at FOREX.com, said that he sees growing risks that gold’s price action is setting up for a longer consolidation similar to other significant rallies.

He noted that gold prices are up $1,275 above their 200-week moving average, representing a 61% premium.

“It’s rare to see such a wide gap sustained unless macroeconomic conditions remain strongly supportive. Yes, today’s environment may justify it, but mean reversion has a way of pulling things back in line,” he said. “With gold falling back below the $3300 mark, the next support to watch is at $3245, formerly resistance, followed by $3,167, which was also a prior resistance level. Beneath that, $3,100 and then the crucial $3,000 zone are key levels to watch. A deeper flush could see gold revisit $2,956 or even the longer-term safety net at $2,790. But let’s not get too bearish just yet and see where gold will head in the coming days.”

According to some analysts, gold will continue to be sensitive to global trade and geopolitical headlines as the economic calendar is relatively light. Many international markets are closed on Monday for a prolonged Easter break.

Economic data to watch next week:

Wednesday: Flash manufacturing and service sector PMI, US New Home Sales
Thursday: US Durable Goods Orders, US weekly jobless claims, US existing home sales

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