Gold Breaks $4,700: Profit Taking + Margin Rise, Safe-Haven Sentiment Fades!
The price of gold (XAU/USD) fell to the $4,680 area during the Asian session on Friday morning, down around 2.7% on the day. Selling pressure emerged after the previous rally, as the market began to "take profits" and tidy up positions.
The main trigger was profit-taking amidst fragile market conditions. Many traders closed gold positions to cover losses from stocks, so gold was also affected by the forced selling effect.
Pressure also came from the technical side of the derivatives market: the CME again increased the initial margin for gold and silver futures contracts. This means traders must deposit more collateral to maintain their positions—and this often leads some to choose to liquidate their gold positions.
At the same time, the decline in technology stocks exacerbated the situation. As stocks fell and margins tightened, some market participants were forced to sell "profitable" assets such as gold to meet collateral needs.
From a geopolitical perspective, easing tensions also weakened demand for safe-haven assets. Confirmation that US and Iranian officials will hold diplomatic talks in Oman has led the market to view the risk of conflict as slightly lower—which is typically negative for gold.
However, gold still has the potential to resist declines if the US dollar weakens. One issue being monitored is concerns about the Fed's independence, which could put pressure on the USD and theoretically support dollar-denominated commodities like gold.
The market is also awaiting Michigan Consumer Sentiment data (preliminary release), which could influence the direction of the dollar and interest rate expectations. If consumer sentiment weakens sharply, the market could re-price the easing scenario—which is usually a positive sign for gold. (asd)
Source: Newsmaker.id
