Gold prices fell below $2,000 on Tuesday in their worst daily drop since 2013 after a rally that pushed them to almost $2,100 per troy ounce, then gained in Wednesday trading by as much as 6 percent.
The correction this week was mainly due to profit taking and not to any fundamental shifts in the economy, said Gary Wagner, editor of TheGoldForecast.com.
“The price rise was almost solely attributable to robust investor demand, with all other demand components playing hardly any role,” Commerzbank analyst Carsten Fritsch wrote in a note to clients.
Based on trading activity, Wagner said he predicts the correction will be short-lived.
“Personally, I do not believe it’s the end of a bull rally,” Wagner told Kitco News. “We have entered some sort of a correction. The question … is whether or not this will be a shallow or short correction or an extended correction.”
Gold has seen a multi-week rally with prices rising above $2,000 an ounce to record highs. However, risk appetites rebounded on Tuesday as U.S. covid-19 hospitalizations fell and investors maintained hopes of another stimulus package, Business Insider reported.
Many gold traders jumped all over the news that Russia had approved a vaccine before completing clinical trials, prompting widespread selling, said Edward Moya, a senior market analyst at Oanda, in a note.
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Craig Erlam, a senior market analyst at OANDA Europe, credits rising Treasury yields on Tuesday with delivering “a sledgehammer blow to precious metal markets,” according to Business Insider.
After being mostly owned by central banks and investment funds, gold is increasingly attracting interest from retail investors. That new popularity could drive gold to fresh records, said Ole Hansen, head of commodity strategy at Saxo Bank.
“What I’m seeing is even with a strong correction, and a really, really massive price decline, there were buyers willing to buy the dip, and that is what will make this correction short-lived,” Wagner predicted.
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