Gold prices snapped a nine-week winning streak, undergoing a sharp correction as the market reassessed a rally that had propelled the metal into overbought territory. Bullion trimmed losses on Friday after a softer-than-expected US inflation report bolstered expectations of further monetary easing by the US Federal Reserve. Bond yields edged lower as traders factored in a strong possibility of two interest rate cuts before the end of the year. Gold tends to benefit from lower interest rates, as it does not offer a yield.
Investors are closely monitoring the potential for improved relations between the US and China, with US President Donald Trump and his counterpart, Xi Jinping, scheduled to meet this week to try and de-escalate the ongoing trade war. An agreement between the two nations could alleviate some of the geopolitical tensions that have supported demand for safe-haven assets like gold.
The rally, which began in mid-August and drove prices to an all-time high of $US4,381.52 an ounce on Tuesday, came to an abrupt halt the following day as investors took profits. This downturn coincided with significant outflows from gold-backed exchange-traded funds. These funds experienced their largest single-day decline in tonnage terms in five months on Thursday, according to data compiled by Bloomberg.
“The correction looks to be stabilising, but broader retail participation means volatility will likely remain elevated,” noted Saxo Capital’s Charu Chanana. “The next key resistance sits near $US4,148, but a clear break above $US4,236 may be necessary to confirm that upside momentum is back.” Spot gold fell 0.3 per cent to close at $US4,113.05 an ounce in New York, resulting in a weekly loss of 3.3 per cent. Silver, which hit a record high last week above $US54 an ounce, also saw price movements.
