Gold prices have declined for a third consecutive day, edging closer to the $US4000 an ounce mark amid growing concerns that the extended rally had become overheated. Spot gold slipped to around $US4090 an ounce in early Asian trading on Thursday, reinforcing a technical reset. Investors are also considering the potential for a US-China trade agreement to alleviate some of the geopolitical tensions that have previously bolstered demand for safe-haven assets. The precious metal has fallen nearly 6 per cent in the last two sessions from its recent record high.
Technical indicators had suggested that the rally was likely overextended, with this week’s pullback alleviating some of the market pressure. Since mid-August, gold’s growth has been driven by the ‘debasement trade’, where investors seek to avoid sovereign debt and currencies to protect themselves from budget deficits.
Despite the recent pullback, gold is still up about 55 per cent this year. Prices have also been supported in recent weeks by expectations that the US Federal Reserve will implement at least a quarter of a percentage point rate cut by the end of the year.
According to Hebe Chen, an analyst at Vantage Global Prime, gold is behaving like ‘an elastic band that’s been pulled too far and is now snapping back hard’. Gold edged lower to $US4095 an ounce in Singapore trading. Silver extended its decline after dropping 7.6 per cent in the past two sessions. Palladium saw gains, while platinum experienced a drop.