Gold prices retreated on Tuesday after two consecutive days of gains, with silver also declining, as investors engaged in profit-taking while seeking clear direction in a market characterized by high volatility and recent historic declines.
Spot gold fell by as much as 1.4% before paring losses, trading slightly above $5,000 per ounce. Traders are focusing on upcoming US economic data releases this week for clues regarding the Federal Reserve's policy direction. Despite a roughly 10% drop from the record high set on January 29, gold has maintained a steady upward trajectory for the year.
According to Hebe Chen, an analyst at Vantage Markets in Melbourne, the price movement "points to profit-taking and position reduction rather than a renewed rush to exit the market." She noted, "The key point is that, despite the recent sharp decline, gold has held above $5,000—a psychological barrier that is expected to serve as a significant technical hurdle for sellers, even as buyers remain cautious following the volatility."
Precious metals experienced a significant sell-off at the end of January, when a record-breaking surge driven by speculative trading led to an overheated market. However, many factors that have supported the multi-year rally—including heightened geopolitical risks, sustained central bank purchases, and investor flight from sovereign bonds and currencies—remain intact. Numerous banks and asset management firms, including Deutsche Bank and Goldman Sachs, anticipate a rebound in gold prices, citing these long-term demand drivers.
The People's Bank of China added to its gold reserves for the 15th consecutive month in January, underscoring the resilience of official sector demand.
Additionally, in January, Indian investors channeled more money into gold exchange-traded funds (ETFs) than into equity mutual funds. Data released on Tuesday by the Association of Mutual Funds in India showed net inflows into gold ETFs surged to a record 240.4 billion rupees (approximately $2.65 billion), slightly exceeding the 240.3 billion rupees流入 equity funds. This milestone represents one of the strongest endorsements of gold by local investors in recent years.
In India, these global trends are reinforced by the metal's deep cultural significance, providing additional support for capital inflows.
Christopher Wong, a strategist at OCBC Bank, commented, "This market correction was a much-needed reset for gold to resume its gradual upward trend." He added, "The structural drivers supporting gold remain intact. Downward momentum has weakened, and prices have begun to stabilize at lower, albeit still historically high, levels."
Looking ahead, economic data releases later this week will offer further insight into Federal Reserve policy following former President Trump's nomination of Kevin Warsh as the next Fed Chair. Wednesday's January non-farm payrolls report is expected to indicate stabilization in the labor market, with inflation data scheduled for release on Friday.