World gold prices fluctuated around the threshold of 5,000 USD/ounce after two consecutive increasing sessions, as investors assessed whether the market has found a balance after the strongest sell-off in many years.
In the trading session on Wednesday in New York, spot gold fluctuated in a narrow range, while silver prices turned down sharply. Compared to the historical peak set on January 29, gold prices have adjusted by about 10%, but still maintained a significant increase since the beginning of the year.
The hot upward momentum of the precious metal group – boosted by speculative cash flow – suddenly stalled at the end of January. At that time, silver recorded its strongest decline in history, while gold plunged deepest since 2013. However, many fundamental factors that once supported the long-term upward trend of gold still exist, including increased geopolitical risks, persistent buying pressure from central banks and expectations of lower interest rates.
According to Mr. Mark Haefele, Global Asset Management Investment Director of UBS Group AG, recent strong fluctuations have made a part of the market question the safe haven role of gold in the face of geopolitical and financial shocks. However, UBS believes these concerns are "excessive" and the upward trend of gold will soon return.
Sharing the same view, many major financial institutions such as Deutsche Bank AG and Goldman Sachs Group Inc. also expressed optimism about the recovery potential of gold prices. Notably, the Central Bank of China extended its gold buying streak to the 15th consecutive month in January, showing that official demand is still very solid.
In terms of monetary policy, Mr. Kevin Warsh - who was chosen by President Donald Trump for the position of Chairman of the US Federal Reserve - has publicly supported interest rate cuts. According to UBS, combined with persistent geopolitical risks, this trend will continue to support gold prices, even as long-term concerns about the strength of the USD somewhat subside.
In the near future, a series of US economic data released last weekend is expected to provide more signals about the Fed's policy roadmap. The January jobs report, scheduled to be released on Wednesday, may show that the labor market is gradually stabilizing, while inflation data will be released on Friday.
In this morning's trading session, spot gold price was at 5,042.93 USD/ounce. Silver price fell sharply by 2.6% to 81.24 USD/ounce; platinum and palladium also simultaneously went down. The Bloomberg Dollar Spot Index - a measure of the strength of the USD - is almost unchanged.
