Gold prices slipped close to 3% this week due to a sell-off and profit bookings from investors. While several analysts called the dip a healthy correction, others cautioned that a major fall is on the cards. Chris Vermeulen, Chief Market Strategist at The Technical Traders, warned that gold could tank 38% next. That’s a doomsday prediction and rattles the broader commodity markets.
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Investors Vary as Gold Prices Fall to $3,900 Range
The renewed selling pressure in gold is putting the XAU/USD index in a weaker position. Its price reached a daily low of $3,936, indicating it could dip to the $3,800 range. So why are gold prices falling, you may ask? The prices are falling due to renewed US and China trade agreement talks, which are easing some geopolitical uncertainty.
The development of the trade negotiations made the US stock market soar on Monday. The Nasdaq Composite spiked 432 points, while the Dow Jones rose 337 points. In addition, the S&P 500 index surged by 83 points, which made gold prices take the back seat.
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“The decline in gold prices has coincided with renewed optimism surrounding trade negotiations between the United States and China. As risk sentiment improved, the S&P 500 reached fresh record highs, leaving safe-haven assets like gold on the back foot,” said Fawad Razaqzada, Market Analyst at City Index and FOREX.com.
While demand for gold is still high, it’s not as attractive as it was a month ago. If Trump manages to smooth out the trade deals with China, gold prices could begin to decline hereon. “While these developments have lifted market spirits, analysts remain skeptical that the underlying issues, such as national security and tech competition, will be fully resolved. Nevertheless, traders have embraced the risk-on mood, leaving less immediate demand for gold as a hedge,” he said.