Gold Drops 1%... Is a New Rise on the Horizon?
Gold prices dropped at the start of trading on Monday, losing about 1% of their value, as markets appeared calm due to holidays in the United States and China, which weakened trading volumes and pushed some investors to take profits after a strong rally in the previous session.
By 01:11 GMT, gold fell in spot transactions to $4,986.32 per ounce, while U.S. futures contracts for April dropped by 0.8% to $5,005.60.
The yellow metal had ended Friday's session with gains of 2.5%, supported by U.S. inflation data that bolstered bets on interest rate cuts.
* Dollar and Bond Yields Pressures
The decline came under the influence of a strong dollar and rising U.S. bond yields, alongside the release of economic data showing the resilience of the U.S. economy.
The U.S. Bureau of Labor Statistics announced that the Consumer Price Index rose by 0.2% in January, lower than the expected 0.3%, following a 0.3% increase in December without revision.
Although the reading came in below expectations, the strength of the labor market and the rise in job numbers kept caution regarding the pace of interest rate cuts.
Chicago Federal Reserve President Austan Goolsbee indicated that rates may be cut later, but service inflation remains high.
* Rate Cut Bets
According to data compiled by the London Stock Exchange Group, investors expect interest rates to be held steady at the March 18 meeting, with a total cut of about 75 basis points over the year, with the first potential cut in July. Gold, which does not yield returns, typically benefits from a low-interest-rate environment.
* Profit-Taking and Weak Trading
Tim Waterer, chief market analyst at "KCM Trade," stated that gold gave up some of its recent gains due to the absence of new upward catalysts and a decline in trading volumes, in addition to profit-taking.
This coincided with the closure of U.S. markets for Presidents' Day and Chinese markets celebrating the Lunar New Year.
* Geopolitical Tensions Support Gold
On the geopolitical front, two U.S. officials reported that the U.S. military is preparing for a potential operation that could last weeks against Iran if a political decision is made, which enhances gold's appeal as a safe haven amid rising tensions.
* Optimistic Outlook for Q2
Target Investment CEO Nour El-Din Mohammed considered that gold's movement within a narrow range could be a precursor to a new upward wave, although the strength of the labor market may delay interest rate cuts.
He confirmed that the yellow metal continues to benefit from ongoing geopolitical tensions.
In this context, ANZ analysts raised their gold price forecast for the second quarter to $5,800 per ounce from $5,400 previously, based on increasing demand for it as a hedge asset.
* Other Precious Metals
Silver was not far from the downward wave, as it fell in spot transactions by 2.4% to $75.64 per ounce after gaining 3% on Friday.
Platinum also dropped by 0.8% to $2,045.11, and palladium decreased by 0.7% to $1,673.52.
Amid pressures from the dollar and anticipation of Federal Reserve decisions and escalating geopolitical risks, gold remains in a tug-of-war between temporary correction and ambitions to reach new record levels in the coming months.
