Gold Near $4,000 — Is This a Sign of Still Safety, or the Beginning of a Deeper Decline?
Gold prices are still hovering around $4,000 per ounce after a sharp drop of more than 3%. Selling pressure is emerging as US-China relations begin to thaw. Negotiators from Washington and Beijing say they have reached agreement on several major issues, such as tariffs and export controls. If trade tensions ease, the market perceives global risks to also decrease, so the demand for "escape assets" like gold automatically decreases. Meanwhile, government bond yields are rising because the market believes the Fed will remain lenient on interest rates, and higher yields typically make gold less attractive since it doesn't pay interest.
Just a week ago, gold had just hit a record high above $4,380 per ounce, boosted by central bank spending and concerns about weakening currencies due to ballooning government debt. Gold is still up more than 50% this year, so it's understandable that many traders are starting to take significant profits. Analysts also warn that gold long positions are already overcrowded, so if large players using leverage simultaneously lock in profits, the price could fall rapidly. Citi even projects that gold prices could correct to the $3,800 per ounce area in the next three months if the "global panic" sentiment subsides.
At the macro level, the market is also focused on the Fed. The US central bank is expected to cut interest rates again by 25 basis points at its meeting, which concludes Wednesday, making it the second consecutive rate cut. The names of potential successors to Fed Chair Jerome Powell next year are also starting to narrow, which is making investors increasingly watch the direction of the next monetary policy. The bottom line: gold is still expensive, but its momentum is weakening. The question now is not "will gold correct," but "how far will it fall from here?"
Source: Newsmaker.id
