Gold prices witnessed a sharp decline, plummeting by more than 2.50% and retracing gains made earlier in the week as concerns in the Middle East subsided. The significant pullback in gold prices can be attributed to profit-taking, according to Jim Wyckoff of Kitco News, coupled with a modest uptick in the US dollar.
The XAU/USD pair is currently trading at $2,329 after reaching a daily peak of $2,392, driven by heightened tensions between Israel and Iran last Friday. However, with Tehran downplaying Israel’s retaliatory drone strike on April 19, perceived as an escalation in the conflict, market sentiment shifted, leading to a decline in demand for safe-haven assets like gold.
Furthermore, market participants are adjusting their expectations regarding the Federal Reserve’s monetary policy, with indications that the Fed may delay rate cuts beyond initial projections. This adjustment in expectations further weighed on gold prices.
Federal Reserve officials, including Chairman Jerome Powell, adopted a hawkish stance, emphasizing the need to keep interest rates elevated for a longer period due to concerns about the sluggish progress in addressing disinflation. Austan Goolsbee, a prominent member of the Federal Open Market Committee (FOMC), echoed Powell’s sentiments, noting that progress on inflation has stalled.
The combination of easing tensions in the Middle East, shifting expectations regarding Fed rate policy, and the dollar’s relative strength has contributed to the sharp decline in gold prices, underscoring the volatility and sensitivity of the precious metal to geopolitical and monetary policy developments.
