Gold prices steadied following a modest dip, as investor anxiety about a potential slowdown in the US economy sparked a broad retreat in stocks and most commodities. Bullion was trading above $2,887 an ounce after a slight decline of less than 1% on Monday. The pullback in gold prices followed comments from former President Donald Trump over the weekend, where he indicated that the US economy might face challenges before it recovers, further fueled by his reshaping of trade policy with tariffs. This news stoked fears of an impending recession, leading to concerns that gold, often seen as a safe haven, could dip during significant market sell-offs as investors liquidate assets to cover losses elsewhere.
Despite the recent decline, gold remains up by 10% this year, having hit successive record highs. This rally has been driven by concerns over potential disruptions caused by the Trump administration, increased central bank buying, and speculation that the Federal Reserve may reduce interest rates further. Lower borrowing costs are typically advantageous for non-yielding assets like gold.
However, while gold’s recent ascent has dampened physical demand in some of Asia’s leading economies, particularly India and China, it has been accompanied by consistent investment inflows into gold-backed exchange-traded funds (ETFs). Last week, these inflows reached their highest level since December 2023, according to a Bloomberg tally.
Despite the weaker physical market demand, Standard Chartered analyst Suki Cooper noted that gold is likely to reach new highs this year, provided that investment flows into ETFs continue to offset the slowdown in physical demand.
Ahead of Monday’s market pullback, investors had begun scaling back their exposure to gold. Hedge funds reduced their bullish positions on the metal to a nine-week low, as reported by the latest Commodity Futures Trading Commission data.
As of 8:58 a.m. in Singapore, spot gold remained relatively unchanged at $2,887.77 an ounce. The Bloomberg Dollar Spot Index was flat after rising on Monday. Meanwhile, silver, palladium, and platinum all extended their losses.
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