Gold prices retreated after a strong rally
Gold prices fell sharply on Tuesday, retreating from a three-week high, pressured by two main factors: profit-taking by investors and a slight rise in the value of the US dollar. This decline followed a significant jump of over 2% in the previous session, prompting traders to secure their gains.
In trading details, spot gold fell 1% to $2,179.77 per ounce by 07:35 GMT, ending a four-session winning streak. U.S. gold futures for April delivery also declined 0.5% to settle at $2,199.40.
General context: Why does gold rise and fall?
Gold has historically been considered a safe haven for investors during times of economic uncertainty and geopolitical tensions. Its recent price surge is attributed to a combination of factors, most notably growing expectations that the Federal Reserve (the US central bank) will begin cutting interest rates this year. Lower interest rates reduce the opportunity cost of holding gold, which does not generate interest, thus increasing its investment appeal.
However, any strong economic data, especially from the US, or hawkish statements from Federal Reserve officials could boost the dollar and lead to a decline in gold. The relationship between the dollar and gold is often inverse; a stronger dollar makes gold more expensive for holders of other currencies, thus reducing demand for it.
The impact of monetary policy and trade tensions
Markets are closely watching the US jobs data for February, which could provide clues about the future path of the Federal Reserve's monetary policy. In this context, Federal Reserve Governor Christopher Waller indicated his openness to holding interest rates steady at the March meeting if the data shows the labor market is on a "more sustainable path.".
On another front, trade and geopolitical tensions are contributing to the long-term support for gold prices. Threats of new tariffs, such as those suggested by former US President Donald Trump, are unsettling markets and driving investors toward safe-haven assets. Ilya Spivak, head of global macroeconomics at Tastylive, said that yesterday's sharp rise in gold was followed by a "digestion process" in current trading, noting that the panic on Wall Street did not spread to Asian markets with the same intensity.
Performance of other precious metals
As for other precious metals, prices were mixed. Silver settled in spot trading at $24.88 an ounce, after hitting its highest level in more than two weeks on Monday. Meanwhile, platinum rose 0.1% to $954.97, and palladium climbed 0.4% to $1,050.14 an ounce. This divergence reflects the fact that each metal is affected by different supply and demand dynamics, in addition to the macroeconomic factors that impact gold.
