Source: Wall Street News
Tensions in the Middle East have eased, and safe-haven demand has weakened. Furthermore, after the recent historic surge, investors' profit settlement is also putting pressure on the price of gold.
As tension in the Middle East eased and safe-haven demand weakened, gold rarely plummeted, recording the biggest intraday decline in nearly two years.
On Monday, gold jumped low. Spot gold once fell 2.8% to a low of $2324.96 per ounce. The intraday drop was nearly $70 per ounce, falling to the closing record high set last Friday, the biggest intraday decline since June 2022.
COMEX's June gold futures closed down 2.79% to $2346.4 per ounce, breaking the closing low since April 5, and the biggest daily decline for major contracts since February 3, 2023.
The conflict between Israel and Iran raised concerns about the outbreak of an all-out war in the Middle East last week, and the tension has cooled down somewhat this week.
According to media reports, Iranian Foreign Ministry spokesman Nasser Kanaani said in a speech in Tehran on Monday that Israel's attack was insignificant and had no military value, and Israel has received the necessary response at this stage.
The media quoted Nicholas Frappell, global head of institutional marketing at ABC Refinery in Sydney, as saying that the Iranian government downplayed Israel's reaction and hinted that it would not retaliate. This fact reduced the risk premium in the gold market.
Bank of America also said in a Monday report that the direct impact of the tension between the Middle East on the US stock market and other asset classes may not be as direct as it seemed in the past two weeks.
After the recent historic surge, investors' profit settlement also put pressure on the price of gold. Since February 2020, the price of gold has risen by more than 50%, and in the past two months alone, it has risen by nearly 20%.
UBS said in a report released last week that although some investors are worried that profits will be settled too soon, given the sharp rise in gold prices, market participants may eventually prefer to sell part of their positions to lock in profits. UBS anticipates that unless geopolitical risks escalate, gold may enter a consolidation period.
Currently, institutions' views on the future gold market are still biased towards optimism, and investment banks, including Goldman Sachs, have been raising the target price of gold.
UBS believes that a healthy correction in gold prices indicates that the market can form a support base at a higher level. This will help strengthen investors' confidence in the long-term bullish market for gold.
Editor/jayden