Gold prices came under moderate downward pressure Tuesday, easing back from all-time highs seen on Monday.
Prices drifted as low as $2,011 an ounce Tuesday, compared with a high of over $2,100 an ounce on Monday. The pull-back was indicative of profit-taking after gold’s surge to an all-time high.
The gains at the start of the week came as already simmering tensions in the Middle East were ratcheted up a notch after news reports said a US warship and three commercial vessels had come under attack with drones and missiles in the Red Sea over the weekend. The news spooked the market due to the perceived risk of the attacks causing the conflict between Israel and Hamas to spread into a wider confrontation. Gold prices rose on the news as investors diverted money into safe havens.
With no further reports of wider conflict since then, gold prices pulled back. Nevertheless, with no immediate signs of an end to hostilities in Gaza, a risk premium is still present in the gold price.
These events came against an already bullish backdrop for gold, with the markets weighing the chances that the US Fed will cut interest rates, potentially as soon as March. Lower rates are constructive for gold prices because they reduce the opportunity cost of holding non-yield-bearing assets like precious metals.
On the macroeconomic front, mixed signals came from the US Tuesday, with the ISM Services PMI data showing stronger than expected growth in the services sector in November, while separate figures showed a drop in job openings in October. Figures indicating the health of the US economy are closely watched in the gold markets for signs of upcoming changes to monetary policy.
Thursday will see Chinese balance of trade data for November, and Friday will see the release of the latest monthly US Non-Farm Payrolls figures.
Carlo is an external market analyst for Kinesis Money. With a credential background in Economic Finance and International Exchange (MA), Carlo’s critical analysis of gold and silver markets’ performance is frequently quoted by leading publications such as Forbes, Reuters, CNBC, and Nasdaq.
This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.
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