Amidst Quiet Markets, Gold Weakens Sharply, What's Happening?
Gold prices weakened by around 1.5% in today's Asian session, although regional market activity tended to be limited due to the Lunar New Year holiday. The correction occurred amid thin liquidity, a condition that typically makes price movements more easily driven by short-term position adjustments.
The main pressure came from profit-taking following a strong rally in the previous session, when softer US inflation data had raised expectations of monetary policy easing. In a quiet market environment, a relatively small selling wave can appear larger in price movements.
From a fundamental perspective, the latest US CPI release showed inflation of 2.4% (yoy) with a monthly increase of 0.2%, reinforcing the belief that the Federal Reserve has room to cut interest rates in the next half of the year. In theory, the prospect of lower interest rates supports gold because it lowers the opportunity cost of holding non-yielding assets.
However, the market is still weighing the resilience of the US economy and central bank signals, so the gold price response is not always linear. Investors are now shifting their focus to the next catalysts, such as the Fed's meeting minutes and the release of core PCE inflation, which are considered more decisive for the direction of interest rate expectations than any single data item.
Geopolitical uncertainty also remains a structural support for gold, but at the same time, it could trigger two-way volatility. The culprits are the continuation of the US-Iran nuclear talks and the Ukraine peace efforts, which are scheduled to resume on Tuesday. The outcome of the talks could potentially influence risk appetite and safe-haven flows.
With mainland Chinese markets closed all week and Asian liquidity reduced, gold has the potential to remain volatile in the short term. For now, the sharp correction in the Asian session is more a reflection of position adjustments in a thin market, while gold's future direction will depend heavily on the Fed's signals and geopolitical developments in the coming days. (asd)
Source: Newsmaker.id
