Gold dropped below $5,000 per ounce as investors booked profits after the release of mild US inflation data. However, banks argue that Gold will continue its upward trend
Bloomberg- Gold dripped below $5,000 per ounce as investors took profits from a gain during the previous session, prompted by mild US inflation data.
The gold dropped by 1.1% after climbing 2.4% on Friday, when a slight increase in the US consumer price index for January alleviated the concerns regarding a bigger jump and encouraged the Federal Reserve to cut interest rates. The decreasing borrowing costs generally benefit the non-yielding precious metals.
The liquidity is thinner than usual during Asian hours due to the closure of Chinese markets this week for the Lunar New Year holiday. The country has witnessed a wild demand for precious metals during the recent months, which encouraged the authorities in the retail hub of Shenzhen to issue a blatant warning against illegal trading of gold, including the use of leveraged apps by retail investors and live streaming via the internet by sellers promoting bullion items.
According to Vantage Markets analyst Hebe Chen, liquidity will be significantly lower and less active during the week in terms of gold trades during Asian hours due to market closure in China on account of holiday periods. In this regard, price volatility will reflect market participants taking advantage of the recent surge above $5000 for gold and making a small profit prior to going back down after the release of Friday’s inflation data for the United States.
In late January, a rush of speculative purchasing caused the price of gold to spike to an all-time high above $5,595. A sudden drop over two days meant the price fell back to just below $4,500. Since then, gold has risen by close to half of the amount it lost during this two-day drop, in volatile trading.
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Many banks believe gold will continue to trend higher, citing geopolitical unrest, doubts about Federal Reserve independence, and a wider trend away from traditional assets like currencies and sovereign bonds as the primary catalysts for the continued advance already achieved.
According to ANZ Group Holdings Limited, gold is expected to reach $5,800 per troy ounce in Q2, echoing similar predictions made by other financial institutions.
In a statement, Chen indicated that gold has retained structural strength in its recent downturn. The macroeconomic environment remains relatively stable; hence, despite recent price declines, gold’s technical support level remains valid.
As of 11:10 am in Singapore, spot prices for gold were 1% lower to $4,991.75 per ounce; silver traded at $75.46 per ounce (-2.5%); and platinum and palladium both experienced minor declines as well. The Bloomberg Dollar Spot Index, an index of the value of the United States Dollar, shows a 0.1% increase.
