Gold Slashes After Touching $5,419: What Triggered It?
Gold prices, which surged earlier this morning and briefly touched $5,419/oz, have now pared their gains to around $5,283/oz. Fundamentally, this is a typical "spike then cool" pattern, where the market initially panics (risk-off), then enters a phase of recalculating risk and taking profits.
The first trigger was profit-taking. After a sharp spike triggered by the escalation of the Middle East conflict, many market participants locked in profits as the US session progressed. Reuters also noted that gold briefly reached $5,418.50 before paring gains as the market assessed the latest developments.
Second, the US dollar and yields rose again, which typically act as a brake on gold. The dollar strengthened as it was once again treated as a safe haven amid wars and energy shocks.
At the same time, following the release of the ISM manufacturing report, the market picked up on signs of burgeoning cost inflation: the Prices Paid component jumped to 70.5 (the highest since 2022). This pushes yields up because the market believes it will be more difficult for the Fed to ease policy quickly if price pressures persist. Rising yields mean a higher opportunity cost of holding gold.
Third, there's the "inflation vs. growth dilemma." Surging energy prices do support gold as a hedge, but at the same time, they can also raise inflation expectations and strengthen the dollar/yield—two factors that hold gold back. So, gold can rise due to fear, but then correct when the market sees the USD/yield also receiving capital inflows.
Fourth, the market is starting to sort things out: gold remains a safe haven, but as turmoil intensifies, some funds also choose to park in cash/dollars (more liquid), especially when volatility is high and margin requirements increase. The result: gold remains "bid," but isn't allowed to rise straight up—a tug-of-war occurs between safe-haven demand and pressure from the dollar/yield and profit-taking.
Source: Newsmaker.id
