Gold prices continued their downward trajectory on Tuesday, following a sharp selloff, while global equity markets showed signs of stabilization after a recent downturn.
Spot gold was down approximately 0.7%, pressured by US data revealing a June trade deficit of $73.1 billion, slightly above the median estimate of 44 economists. This decline follows a 1.3% drop on Monday amid widespread market turmoil.
The rebound in the US dollar and diminished expectations of interest rate cuts by the US Federal Reserve are also contributing to the lower gold prices. In contrast, exchange-traded funds increased their gold holdings by 125,101 troy ounces in the last trading session.
The market turmoil on Monday likely forced some traders to liquidate gold positions to cover margin calls on other investments. Prices fell as much as 3.2% before recovering slightly.
Despite recent declines, gold prices remain up by more than 15% this year, bolstered by previous highs and ongoing support from central bank purchases. The expectation of Fed rate cuts, typically favorable for non-yielding gold, and strong central bank buying are key factors supporting gold prices.
According to a Tuesday report from Commerzbank AG, precious metals were affected by market panic early in the week. Overblown expectations of Fed rate cuts and the need to liquidate assets to cover other losses may have also contributed to gold’s recent weakness.
As of 2:52 p.m. in London, spot gold fell to $2,393.88 per ounce. The Bloomberg Dollar Spot Index and US 10-year Treasury yields both rose, while palladium and platinum saw gains, and silver prices declined.
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