Background on Gold Market and Key Players
Gold prices experienced a decline of more than 1% on Wednesday, as investors took profits following a recent rally. However, some losses were trimmed after weaker-than-expected U.S. employment data supported the argument for Federal Reserve rate cuts. This article provides context on gold market dynamics, key players, and the impact of recent events.
Gold Market Overview
The spot gold price dropped by 0.91%, reaching $4,456.56 per ounce during the session, with a low of 1.7% or $4,422.89 per ounce. U.S. gold futures for February delivery fell by 0.7% and closed at $4,462.50 per ounce.
Investor Behavior and Fed Rate Cut Expectations
David Meger, Director of Metals Trading at High Ridge Futures, explained that the day’s decline was a “broad profit-taking after the recent run-up.” He also noted that weaker employment data continued to back the case for Fed rate cuts, which have recently supported gold prices.
Employment Data and Market Impact
U.S. job offers fell more than anticipated in November, following a marginal increase in October. Meanwhile, an ADP report showed that private sector employment increased less than expected in December. These weaker-than-expected figures reinforced the argument for Fed rate cuts.
China’s Gold Purchasing and Silver Price Drop
China’s central bank continued its streak of gold purchasing for the fourteenth consecutive month in December, according to official data. Among other metals, spot silver fell by 3.82% to $78.19 per ounce.
Analyst Forecasts and Market Volatility
HSBC raised its silver price forecast for 2026 to $68.25, but warned of volatility as supply decreases. Goldman Sachs anticipates that tight London inventories will drive significant price swings and compression-led rallies, which could later reverse.
Decline in Other Precious Metals
Platinum spot price fell by 6.5% to $2,285.75, while palladium dropped by 5.2% to $1,727.40. Copper on the London Metal Exchange (LME) decreased by 2.6% to $12,891.80 per tonne after falling 3% to $12,842.50 due to supply concerns in mining.
Citi’s Copper Price Target and Market Sentiment
On Tuesday, Citi raised its copper price target for the first quarter to $14,000 but kept its 2026 forecast at $13,000. Natalie Scott-Gray from Stonex commented to investors that “the market is afraid of missing out, and frankly, there’s a frenzy around copper that we see as unsustainable.”
Decline in Base Metals Prices
Aluminum fell by 1.51% to $3,086.55 per tonne; zinc lost 2.29% to $3,175.05 per tonne; lead retreated by 0.49% to $2,059.25 per tonne; and tin decreased by 0.8% to $44,110, having earlier reached its highest level since March 2022.
Key Questions and Answers
- Q: Why did gold prices drop more than 1% on Wednesday? A: Investors took profits following a recent rally, and weaker-than-expected U.S. employment data supported the argument for Federal Reserve rate cuts.
- Q: How did other precious metals perform alongside gold? A: Silver prices fell by 3.82%, platinum dropped by 6.5%, and palladium declined by 5.2%. Copper also decreased by 2.6% on the London Metal Exchange.
- Q: What are analysts saying about the current market conditions? A: HSBC raised its silver price forecast, but warned of volatility. Goldman Sachs anticipates significant price swings due to tight London inventories, while Citi increased its copper price target for the first quarter.
