Background on Gold Price Fluctuations
The gold price has experienced both positive and negative trends. Geopolitical conflicts, a weak dollar, and Trump’s tariffs have driven up the price of the precious metal this year. The gold price has surged nearly 60% since January.
Recent Factors Driving Gold Price Down
On Tuesday, a combination of factors led to a decline in gold prices. These include optimism over US-China trade talks, a stronger dollar, overbought technical indicators, and uncertainty regarding investor positions amidst the US government shutdown and the end of India’s shopping season.
Key Events Leading to Gold Price Drop
- Investors took profits after gold reached a historical high due to expectations of US interest rate cuts and sustained safe-haven demand.
- Spot gold fell 5.30% to a one-week low of $1,412.62 per ounce, marking its largest daily decline since August 2020.
- US December gold futures dropped 5.7% and closed at $1,409.10 per ounce.
Gold prices peaked at a record high of $1,431.21 on Monday and have surged 60% this year, driven by geopolitical and economic uncertainty, interest rate cut bets, and continuous central bank purchases.
Experts’ Analysis
- Tai Wong: An independent metals trader noted that investors were buying gold during dips but the recent volatility spike signals caution, encouraging short-term profit-taking.
- Jim Wyckoff: A senior analyst at Kitco Metals explained that a better risk appetite in the broader market early this week is negative for safe-haven metals.
- Bart Melek: TD Securities’ global head of commodity strategy stated that operators and fund managers are taking profits after a very strong rally, with gold’s technical indicators suggesting unsustainable gains and vulnerability to correction.
- Ole Hansen: Saxo Bank AS’s commodity strategist warned that the lack of positioning data during a potential buildup of long speculative positions makes gold more susceptible to corrections.
Impact of Geopolitical and Economic Factors
The US-China trade talks, with President Trump and Xi Jinping set to meet next week to resolve their trade disputes, have cooled safe-haven metal demand. A stronger US dollar has also made gold and silver more expensive for most buyers.
US Government Shutdown Implications
Operators and fund managers are taking profits following a very strong rally, according to Bart Melek of TD Securities. The absence of positioning data during a potential buildup of long speculative positions makes gold more vulnerable to corrections, as noted by Ole Hansen of Saxo Bank AS.
