Gold price falls from weekly high. Will supporting factors continue?
Precious metals markets saw gold prices fall from their highest level in more than a week on Tuesday, as investors took profits after yesterday's significant rise.
This decline comes as markets await a series of crucial US economic data, amid expectations that strong demand from central banks and geopolitical risks will continue to support gold.
Rapid fluctuations and anticipation of US data
The price of gold fell today from a level of around $5,086 per ounce (the highest level in more than a week) to around $5,020, after falling below $5,000 during Asian trading.
This decline is mainly attributed to profit-taking following strong gains in the previous session.
Key data releases this week
Investors are now eagerly awaiting the US economic data due to be released this week, most notably the non-farm payrolls report on Wednesday and the inflation data (consumer price index) on Friday.
These reports will directly affect the Federal Reserve's monetary policy expectations and, consequently, the direction of the gold price, as markets currently expect at least two interest rate cuts this year, creating a supportive environment for gold, which does not generate a return.
Fundamental support factors protect gold from a sharp collapse
Despite short-term volatility, several strong factors continue to support gold in the medium term:
1- Strong demand from central banks
Continuing its strong buying trend, the Chinese central bank continued its gold purchases in January for the fifteenth consecutive month, reflecting the confidence of official institutions in the metal as a strategic reserve asset.
2- Geopolitical risks
Tensions in the Middle East, particularly between the US and Iran, remain a source of concern.
The recent warning to US ships not to approach Iranian waters confirmed the continuing instability, supporting demand for gold as a safe haven.
3- Expectations of accommodative monetary policy
As mentioned, expectations of US interest rate cuts remain the cornerstone of the positive outlook for gold, as they reduce the competitive yield of assets such as bonds.
