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Gold futures extended losses on Tuesday to post their largest two-day percentage drop since February last year, down nearly 3%, as waning fears of escalating tensions in the Middle East dried up l the attractiveness of metal as a safe haven asset.
The gold correction is long late and healthyand will likely challenge traders’ belief that further gains are possible, says Ole Hansen, head of commodity strategy at Saxo Bank, according to Dow Jones.
The correction will help determine the true level of underlying demand for gold, and its extent will depend on the extent of hedge funds’ selling after accumulating a large long position during the bull run, Hansen says.
A “healthy technical pullback was expected,” said Han Tan, chief market analyst at Exinity MarketWatchand gold’s decline still has “more room to end up in sub-$2,300 waters as markets ease geopolitical risk premiums.”
Given recent price action, the risk of a downward correction in gold prices remains high in the near term, but geopolitics remains a bullish wildcard, analysts at JP Morgan said, predicting that gold prices will end the 2024 to average $2,500 per ounce in the fourth quarter with further upside next year.
First-month Comex gold (XAUUSD:CUR) for April delivery is out -0.2% at $2,327.70/oz.
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Silver also underwent a sharp correction, with silver prices LBMA -1.8% at $27.74/ounce in line with gold; Silver has rallied faster than gold in recent weeks, up 13% over the past month versus gold’s 6.2% gain, but is now falling faster.
Hansen tells Dow Jones that silver’s decline has been amplified by its recent failure to break above $30 an ounce, the metal’s 2020 and 2021 highs.