Over the past two weeks, the gold market has recorded a slower increase and stronger fluctuations. According to Carsten Fritsch - commodity analyst at Commerzbank (one of Germany's largest banks, based in Frankfurt), this is a sign that the increase has weakened.
Last night, there was a time when gold prices fell below the support level of 2,900 USD/ounce (down nearly 2% on the day). The latest record shows that spot gold was listed on Kitco at 5:30 a.m. on February 26 (Vietnam time) at $2,915 an ounce. Although it has a recovery trend, this precious metal has left the peak of 2,950 USD/ounce very far.
Fritsch also pointed out that investment demand for gold is changing. The recent rally has been driven largely by capital flows into gold ETFs, while data shows some investors taking profits after betting on the precious metal's upside trend.
The "COT Commitment of Traders" report released by the US Securities and Exchange Commission (CSTC) shows that in the week ended February 18, hedge funds reduced the number of gold purchase contracts on the Comex exchange to 222,538 contracts, down 6,533 contracts compared to the previous week. At the same time, the number of sales contracts increased by 2,941 contracts, to 37,209 contracts.
Data shows that investors have continuously cut their buying positions over the past four weeks, causing the total number of net buying contracts to fall to a one-month low of 185,300 contracts.
"With gold prices continuously hitting new peaks, speculative financial investors should have increased their buying position. However, instead, they have reduced their position.
Obviously, these investors think that there is no room for price increases, so they choose to take profits. This shows that the increase in gold prices is currently being supported by fewer and fewer investors" - Fritsch commented.
Meanwhile, demand for ETF gold in North America has increased strongly. According to data from the World Gold Council (WGC), last week, ETFs in this region recorded net purchases of 48.8 tons of gold, equivalent to 4.6 billion USD - the strongest increase since April 2020.
Fritsch also warned that high gold prices are weakening another important supporting factor - jewelry demand. He cited data from Indian officials, saying that the country's gold imports in February could decrease by 85% compared to the same period last year, down to 15 tons - the lowest level in the past 20 years.
"These developments further reinforce our cautious view of a strong rally since the beginning of the year. We still expect gold prices to correct, but the specific timing cannot be predicted" - Fritsch commented.
Meanwhile, Jim Wyckoff - senior analyst at Kitco.com described this sell-off as a normal profit-taking move after gold prices increased by more than 12% in the first two months of the year.
He also stressed that the decline has not caused significant technical damage on the gold price chart.
"Once the April gold futures fall below the key support level of $2,845/ounce, the market could suffer near-term technical damage, even showing signs of a peak," Wyckoff said.
