Gold prices took a significant hit on Tuesday, falling to a more than two-week low as concerns of escalating tensions in the Middle East eased, leading to profit-taking after a recent rally. Spot gold dropped 1.0% to $2,303.59 per ounce by midday, with silver and palladium also hitting their lowest levels since April 5.
According to Ole Hansen, head of commodity strategy at Saxo Bank, the recent correction in gold prices was overdue but healthy, considering the aggressive rally the precious metal had experienced since mid-February. Gold’s intraday fall of 2.7% on Monday marked its biggest drop in 22 months, following a rally that saw prices soar nearly $400 to an all-time high of $2,431.29 on April 12.
With key areas of support for gold identified around $2,255-2,260 based on Fibonacci retracement levels, analysts are closely watching the market for signs of underlying demand. Central bank purchases and solid physical demand from China have been crucial factors supporting gold prices amidst the recent correction.
Elsewhere, silver fell 0.8% to $26.99 per ounce, while platinum and palladium also experienced declines as they followed gold’s downward trend. The rise of electric vehicles and their increasing market share have put pressure on platinum and palladium prices, with the International Energy Agency predicting that more than one in five cars sold globally will be electric by 2024.
Despite the recent setbacks, physically-backed gold exchange traded funds saw their first weekly net inflows since the end of 2023, further underscoring the ongoing demand for the precious metal. Analysts will be closely monitoring market developments in the coming days to see how gold prices respond to the current correction.
