China Closed, Shenzhen Warning: What Impact Will This Have on Gold Prices?
Gold prices weakened slightly after market participants took profits following the release of relatively moderate US inflation data, which briefly pushed prices back above the psychological level of $5,000 per ounce. Selling pressure emerged when some traders opted to lock in profits after a sharp rise in the previous session.
In early trading, gold fell as much as 0.6%, after surging around 2.4% in the previous session. US Consumer Price Index (CPI) data rose 0.2% in January, easing fears of a larger inflation spike and bolstering speculation that the Federal Reserve has room to cut interest rates.
Expectations of interest rate cuts are generally positive for precious metals, as lower borrowing costs tend to support non-yielding assets like gold. However, after a strong rally, the market is also vulnerable to short-term corrections due to profit-taking and position adjustments.
Historically, gold has remained volatile in recent weeks. It briefly reached a record high above $5,595 in late January, driven by a wave of speculative buying. Following this, a sharp correction occurred at the turn of the month, briefly dragging prices back below $4,500, before eventually recovering and clawing back about half of the losses.
From Asia, attention is focused on China, which is currently entering the Lunar New Year holiday, resulting in reduced domestic market activity. Nevertheless, demand for precious metals in China has been considered very strong in recent months, with authorities in Shenzhen issuing a stern warning regarding "illegal gold trading" in the retail hub.
Several banks still see opportunities for further strengthening, assessing that the drivers of the long-term rally have not changed, ranging from geopolitical tensions to concerns over the Fed's policy independence. ANZ estimates that gold has the potential to reach $5,800 per ounce in the second quarter. In its latest update, spot gold fell about 0.3% to $5,026.96, while silver weakened 1.1% to $76.54, and the Bloomberg Dollar Index edged up 0.1%. (asd)
Source: Newsmaker.id
