Background on Key Figures and Context
Gold prices experienced a significant drop of over 1% on Thursday, following a robust increase in the previous session. This decline occurred as investors took profits ahead of a long weekend, despite the weakening US dollar and escalating tensions between the United States and China. The gold price remained above the $3,300 per ounce level.
Gold Price Movements
- Spot Gold: Fell 1.2% to $3,302.1 per ounce after reaching a historic high of $3,357.40 at the start of the session.
- US Gold Futures: Dropped 0.9% to $3,315 per ounce; the metal’s futures gained 2.98% during the week.
Experts’ Opinions on Gold’s Market Trend
Alex Ebkarian, Operations Director at Allegiance Gold, stated that “gold is in an uptrend, and these subtle pullbacks due to profit-taking are healthy.” Tai Wong, an independent metals trader, echoed this sentiment: “The gold trajectory remains bullish given the uncertainty and deep concern that continues to trouble the asset markets.”
Factors Driving Gold’s Recent Surge
On Wednesday, US President Donald Trump ordered an investigation into potential tariffs on all critical mineral imports, along with reviews of pharmaceutical and chip imports. This action led to a 3.6% increase in gold prices, driven by investor anticipation of safe-haven demand amid trade tensions.
Geopolitical Developments
Trump mentioned “significant progress” in tariff talks with Japan during one of the first face-to-face negotiation rounds since his wave of tariffs on global imports disrupted markets and fueled recession fears. Despite this, the consultancy Metals Focus remains bullish on gold, acknowledging potential short-term corrections due to profit-taking or margin calls triggered by another round of stock liquidations.
Citi Research’s Updated Gold Price Forecast
Citi Research recently raised its gold price target for the next three months to $3,500 per ounce from $3,200, driven by new Chinese insurance company purchases and safe-haven flows amid trade risks and market weakness.
China’s decision to allow 10 insurance companies to allocate up to 1% of their total assets to gold could generate annual demand of around 255 tonnes, which is roughly a quarter of the global central bank purchases, according to Citi.
Key Questions and Answers
- Q: Why did gold prices drop on Thursday? A: Investors took profits ahead of a long weekend, causing the drop. However, the weakening US dollar and rising tensions between the US and China supported gold prices above the $3,300 per ounce level.
- Q: What factors contributed to the recent surge in gold prices? A: President Trump’s order for an investigation into potential tariffs on critical mineral imports and investor anticipation of safe-haven demand amid trade tensions.
- Q: How has Citi Research adjusted its gold price forecast? A: Citi Research increased its three-month gold price target to $3,500 per ounce from $3,200, citing new Chinese insurance company purchases and safe-haven flows.
