Gold prices plunged 5% on Tuesday , the biggest one-day drop in 5 years (or even a decade depending on who you read).
But by Wednesday, gold prices were back in the red, giving up gains from earlier in the session.
Here’s a look at all things that glitter (or not) gold:
Why have gold prices have increased throughout years?
Simply put, the price of gold has risen due to a combination of high inflation (gold holds value when the purchasing power of currencies erodes), increased geopolitical uncertainty (Russian invasion of Ukraine, continued conflicts in the Middle East, increasing U.S.-China trade tensions), higher demand from central banks (diversifying away from the U.S. dollar and into gold helps countries protect their reserves) and investors seeking a safe haven.
Why sudden drop in gold?
Yahoo! Finance said: “The sharp selloff in the previous session was largely attributed to easing tensions between the U.S. and China, but traders remain on edge ahead of delayed U.S. inflation data and upcoming trade talks involving the U.S., China, and India.”
Last two times gold dropped
According to Investopedia , the gold price declined 29% from $1,695 in January 2013 to $1,200 in December 2014.
Following the 2019 pandemic, gold prices fell to a trading range between $1,700 and $1,900 before breaking out in late 2023 to new highs of around $2,135. It subsequently fell to a trading range just above $2,000.
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Any immediate good news about gold?
Despite the dip, gold is still up 56% year-to-date, having reached a record high of $4,381 just days ago. The rally has been fuelled by strong central bank buying, geopolitical tensions and growing expectations that the Federal Reserve may soon cut interest rates.
What is gold’s short-term future?
Russell Shor, senior market analyst at Tradu.com, told Yahoo! Finance: “Gold is likely to remain volatile in the near term after its steepest one-day drop in over a decade. Spot prices fell below $4,070 an ounce as traders took profits following months of record gains fuelled by Fed rate-cut bets, dollar weakness and central bank buying.”
Will price of gold settle in near future?
After Tuesday’s decline, Yahoo! Finance reported that Citigroup downgraded its outlook for gold, moving from an “overweight” recommendation to a more cautious stance. The bank’s commodities research team warned of an excessive concentration in long positions and suggested that gold prices may enter a period of consolidation around the $4,000-per-ounce mark in the coming weeks.
