Gold Breaks Below US$4,000
Gold prices fell below US$4,000 per troy ounce for the first time since November, after a strengthening US dollar and the prospect of higher interest rates dampened the precious metal's appeal. Gold prices briefly fell as much as 2.9% to US$3,999.90 per ounce, extending their decline for the second consecutive session.
This decline is an important signal for the market, as gold had previously recorded a strong rally over the past three years. The price of the precious metal had more than doubled, supported by central bank buying, retail investor interest, and fund inflows from fund managers. However, the rally began to lose momentum after gold hit a record high near US$5,600 per ounce in late January.
The pressure intensified after gold prices fell more than 20% from their recent peak. Technically, a decline of more than 20% is often considered a sign of the market entering a bearish phase. This means that gold is no longer experiencing a simple correction but is beginning to face a more significant shift in sentiment.
The main factor weighing on gold is changing expectations regarding US interest rates. The US-Iran war had driven energy prices up sharply and raised concerns about renewed inflation. When inflation is expected to remain high, the market sees a greater chance of the Fed raising interest rates. This makes gold less attractive compared to interest-bearing assets like US government bonds.
The hawkish tone from Fed Chairman Kevin Warsh also increased pressure on gold. Warsh surprised the market by affirming a strong commitment to price stability in his first policy meeting. This message led investors to believe the Fed would not easily ease policy, causing the dollar to strengthen again and real US bond yields to rise. For gold, the combination of a strong dollar and high yields creates double pressure.
Several major banks have begun cutting their gold price projections. Goldman Sachs lowered its year-end target from US$500 to US$4,900 per ounce, while Deutsche Bank cut its fourth-quarter forecast by 17%. Outflows from gold ETFs also indicate weakening investor support. However, one factor still supporting gold is central bank demand, which remains strong and is expected to continue for some time to come. (gn)*
Source: Newsmaker.id
