- Gold’s dynamic rise was driven by inflation concerns, monetary easing, and geopolitical uncertainty.
- The current correction of over 5% is the largest single-day drop since 2020.
- Gold’s dynamic rise was driven by inflation concerns, monetary easing, and geopolitical uncertainty.
- The current correction of over 5% is the largest single-day drop since 2020.
In recent weeks, the price of gold has been steadily rising, setting new records and attracting increased attention from investors worldwide. The price increase was driven by a range of fundamental factors, primarily concerns over rising inflation, expectations of further monetary easing by major central banks, and growing geopolitical uncertainty. As a result, gold has strengthened its position as one of the key safe-haven assets.
Today, gold is losing over 5%, marking the sharpest correction in the metal’s price since August 2020. Such a rapid decline is a result of profit-taking by investors as well as changing fundamental and technical conditions that influence the short-term market sentiment.
What is behind the correction in the gold market?
Profit-taking after rapid price gains
Over the past few weeks, the price of gold has risen significantly, creating a favorable opportunity for investors to take profits. The price increase was mainly driven by growing concerns about inflation, monetary policy, and geopolitical tensions. After reaching historic highs, some market participants decided to sell their positions, which put downward pressure on the value of gold.
Strengthening of the US dollar
The US dollar index rose by approximately 0.4%, making gold more expensive for investors using other currencies. A stronger dollar reduces gold’s appeal as an investment asset, contributing to downward pressure on prices.
Easing of US-China trade tensions
The announced meeting between US and Chinese leaders raised expectations of a possible easing of trade disputes. The prospect of a trade agreement reduces demand for gold as a safe-haven investment.
End of the buying season in India
The gold buying season in India, the world’s second-largest consumer of the metal, has recently ended. As a result, demand in the Indian market has weakened, which has contributed to reduced upward pressure on gold prices.
Technical situation
Source: xStation5
Recent weeks have seen a strong rise in gold prices, which recently reached a record level of around $4,381 per ounce. Currently, a sharp correction is underway, with the price falling by over 5%, marking the largest single-day drop since August 2020. Key support levels are around $4,100, followed by $4,050 and the psychological $4,000 mark. Breaking these levels could signal further declines.
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