Gold Holds Gains After Historic Retreat Lures Back Dip Buyers
(Bloomberg) -- Gold dipped below $5,000 an ounce amid a lack of fresh catalysts to support the market following a historic price plunge late last week.
The precious metal has been in a listless pattern this week as traders look for the next big breakout and as they book recent profits. Prices are more than $1,000 below the all-time high hit on Jan. 29, but remain up more than 10% for the year.
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Bullion on Wednesday fell as much as 1.2% to $4,888.19 an ounce as the dollar pushed higher. Earlier, it gained as much as 2.9% to top $5,000 as dip buyers came in. Silver pared gains.
“I think this volatility is going to continue in the near term,” said Ewa Manthey, a commodity strategist at ING Bank. “The market will continue to adjust positioning, and the moves will be less linear than what we’ve seen over the past few weeks.”
Gold has also drawn support from geopolitical tensions, as strains between the US and Iran intensified following the American Navy’s downing of an Iranian drone. President Donald Trump, however, reiterated that diplomatic talks between the two countries are ongoing.
Precious metals soared last month in a rally underpinned by speculative momentum, geopolitical upheaval and concerns about the Federal Reserve’s independence. However, market watchers warned that the advances had been too large and too swift. The surge came to a sudden halt at the end of last week, with silver seeing its biggest daily drop on record and gold plunging the most since 2013.
Need a ‘Catalyst’
For gold to stay above $5,000, it “will need a catalyst,” said Bart Melek, global head of commodity strategist at TD Securities. Bullion will see continued rangebound trading in the coming weeks, according to Melek.
Still, investors and analysts believe the fundamentals that drove bullion to record highs remain intact. Fidelity Fund, which sold a chunk of gold holdings days before the plunge, is watching for an opportunity to buy again, portfolio manager George Efstathopoulos told Bloomberg News.
Many banks have backed gold to recover, with Deutsche Bank AG saying on Monday that it was standing by its forecast for bullion to rally to $6,000 an ounce. Goldman Sachs said in a note that it sees “significant upside risk” to its year-end forecast of $5,400.
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