Gold prices edged lower on Monday, stabilising just above the $2,500 mark following a record-breaking rally. The precious metal, which has seen a remarkable 20% rise this year, experienced a slight pullback as traders took profits after last week’s surge to an all-time high.
The spot price of gold dropped by 0.2%, settling at $2,502.78 per ounce as of 0317 GMT. In contrast, US gold futures managed a modest 0.2% increase, reaching $2,541.80 per ounce.
The recent surge in gold prices was largely driven by expectations of an imminent interest rate cut by the US Federal Reserve. The anticipation of a rate cut in September has been fuelled by a combination of softer economic data, including a robust retail sales report, lower-than-expected unemployment claims, and mild inflation.
This economic backdrop has bolstered confidence in the US economy while also increasing demand for gold as a hedge against potential currency depreciation and inflation.
Central bank activity and geopolitical tensions bolster gold demand
The climb to $2,509.65 per ounce last Friday was also supported by increased geopolitical tensions and continued robust buying by central banks.
The heightened demand from central banks, coupled with a favourable macroeconomic environment, has played a significant role in driving gold prices to new heights this year.
With gold now trading above the psychologically significant $2,500 level, market participants are beginning to lock in profits. According to market analysts, this profit-taking is a natural response following such a rapid ascent.
The recent price movement suggests that the market may be entering a period of consolidation as investors weigh the likelihood of further gains against the potential for short-term corrections.
Market eyes Fed’s Jackson Hole Symposium for further cues
As the market awaits further clarity on the Federal Reserve’s monetary policy direction, attention is now focused on the upcoming Jackson Hole Symposium, where Fed Chair Jerome Powell is expected to provide insights into the central bank’s future policy stance.
Traders are currently pricing in a 75.5% probability of a 25-basis-point rate cut in September, according to the CME FedWatch tool. The tone and language of Powell’s speech could provide crucial signals on the size and timing of the anticipated rate reduction.
The release of the minutes from the Fed’s July policy meeting on Wednesday is expected to offer further guidance on the central bank’s thinking. These developments will likely play a key role in shaping the near-term trajectory of gold prices.
Gold-backed ETFs and speculative positions on the rise
Investor interest in gold remains strong, as evidenced by recent inflows into gold-backed exchange-traded funds (ETFs). Holdings of the SPDR Gold Trust, the world’s largest gold-backed ETF, rose by nearly 1% on Friday, reflecting continued investor demand for safe-haven assets.
In the futures market, speculative positions have also increased, with COMEX gold speculators raising their net long positions by 34,197 contracts in the week ending August 13, according to data from the Commodity Futures Trading Commission.
Chinese banks increase gold imports amid high prices
Despite the record high prices, demand for gold in China appears resilient. Several Chinese banks have recently been granted new gold import quotas by the central bank, signalling expectations of revived demand in the world’s largest gold market.
The move suggests that Chinese buyers remain undeterred by the elevated price levels, possibly driven by concerns over the domestic economy and currency stability.
Broader precious metals market sees mixed performance
In the broader precious metals market, spot silver rose by 0.2% to $29.08 per ounce, continuing its positive momentum. Platinum also saw gains, rising by 0.4% to $957.75 per ounce, while palladium bucked the trend, falling by 0.4% to $947.13 per ounce.
The mixed performance across the precious metals spectrum highlights the varied factors influencing these markets, including industrial demand, supply constraints, and investor sentiment.
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