"Part of the reason may lie in the fact that geopolitical risks had already been significantly priced in earlier. Prior to the correction, gold had risen for four consecutive weeks, pushing prices close to $5,420/oz and creating conditions for investment funds as well as retail traders to take profits, thereby triggering a sharp short-term pullback."
"Additionally, during periods of heightened volatility or rising market panic, capital often flows into the U.S. dollar before gold due to its superior liquidity. In fact, the U.S. Dollar Index recorded its second consecutive daily gain yesterday, approaching the 98.8 level, which added further downward pressure on the precious metal."
"However, in my view, the recent decline primarily reflects increased volatility following a strong rally, rather than signalling the start of a sustained bearish trend. In an environment where geopolitical risks continue to escalate, gold still maintains its role as a key safe-haven asset."
"From the perspective of institutional flows, data from Bitget indicates that gold ETFs recorded strong inflows during January and February. By the end of February, SPDR held approximately 1,101 tons of gold, while according to SPDR Gold Shares, the fund's holdings in early March remained around 1,094 tons."
Gold experienced a sharp correction from its peak near $5,420/oz to approximately $5,000/oz, despite escalating US-Iran military tensions. Geopolitical risks had already been priced into the market before the pullback. The decline was triggered by profit-taking from investment funds and retail traders following four consecutive weeks of gains. Capital flows favored the U.S. dollar due to its superior liquidity during heightened volatility, with the Dollar Index gaining to near 98.8 levels. However, this correction represents increased volatility following a strong rally rather than the beginning of a sustained bearish trend. Gold maintains its safe-haven asset status amid ongoing geopolitical risks. The $5,000/oz level provides crucial psychological support. Institutional data shows gold ETFs recorded strong inflows in January and February, with SPDR holdings remaining relatively stable, indicating the sell-off originated from futures markets and short-term profit-taking rather than significant institutional withdrawals.
#gold-price-correction #geopolitical-risk #safe-haven-assets #institutional-flows #us-dollar-strength
Read at London Business News | Londonlovesbusiness.com
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