Gold Hits Record, Then Slips — What Triggered the Sudden Fall?

A somewhat milder tone from U.S. President Donald Trump about the Federal Reserve chair and Iran also depressed demand for safe havens, and gold fell on Thursday as speculators booked profits after the yellow metal reached a record in the previous session.

Gold prices retreat after record high

As of 0501 GMT, spot gold has dropped 0.7% to $4,589.71 per ounce. Bullion reached a record $4,642.72 during the previous session. Futures for US gold for delivery in February dropped 0.9% to $4,594.10.

Profit-taking weighs on bullion

“Today, we are seeing that gold is down a little after (Trump) indicated maybe we are not going to act in Iran, staving off safe-haven demand, but the overall narrative (of the metal’s increase) is not going away,” said Ilya Spivak, Tastylive’s head of global macro.

Geopolitical tensions show signs of easing

In an effort to counter Trump’s repeated warnings of military involvement, Tehran threatened U.S. military outposts in the area as Iran’s leadership attempted to put an end to the biggest internal turmoil since the 1979 revolution. However, Trump implied at the White House that he was taking a cautious approach to the situation.

Federal Reserve stance remains in focus

Despite the criminal investigation by the Justice Department, the president said on Wednesday that he had no intentions to remove Fed Chair Jerome Powell. However, he stressed that it was “too early” to make any final decisions.

Upcoming US data awaited by markets

Later in the day, the U.S. weekly unemployment claims for the first week of January will be made public, which may provide hints about the Fed’s monetary policy direction. This year, traders expect two interest rate reductions.

Precious metals react to shifting sentiment

Gold and other non-yielding investments have historically benefited from low interest rates, geopolitical unpredictability, and economic instability. After reaching an all-time high of $93.57 earlier in the session, spot silver fell 5.5% to $87.62 per ounce.

Platinum and palladium also decline

After reaching a record high of $2,478.50 on December 29, spot platinum fell 3.3% to $2,305.90 per ounce, a one-week high. At $1,778.80 per ounce, palladium dropped 2.6% and was close to a one-week low.

Frequently asked questions

1. After reaching a record high, why did gold prices decline?

Investors’ profit-taking and the United States’ weaker geopolitical posture, which decreased demand for safe havens right away, caused gold prices to decline.

2. What effect did American political remarks have on gold prices?

Gold demand as a hedge decreased after President Donald Trump’s remarks suggesting a wait-and-see strategy on Iran and no imminent action against the Fed Chair allayed market anxieties.

3. How do interest rates affect the price of gold?

Since gold does not produce interest, lower interest rates tend to boost gold prices.

4. What caused the steep decline in silver and platinum?

After hitting record or multiweek highs, silver and platinum suffered significant drops as a result of aggressive profit-booking.

5. What future information could affect the price of gold?

Future Federal Reserve policy signals and weekly unemployment claims in the United States might have a big influence on gold and other precious metals.

Conclusion

After hitting all-time highs, gold prices declined as investors locked in gains and global tensions seemed to be abating. Gold’s long-term outlook is still supported by predictions of interest rate decreases and persistent global uncertainty, even if short-term pressure is still there. Following significant rallies, other precious metals including silver and platinum also declined.

Disclaimer

This article is for informational purposes only and does not constitute financial, investment, or trading advice. Market prices may change rapidly. Readers are advised to conduct their own research or consult a qualified financial advisor before making any investment decisions.