Gold edges lower as traders lock in gains after rally above $5,000 an ounce

By Robin Paxton

 

Gold slipped, as traders booked profits after mild US inflation data pushed the metal back above $5,000 an ounce.

 

Bullion fell as much as 0.8 per cent on Monday, after climbing 2.4 per cent in the previous session. The US consumer price index rose 0.2 per cent in January, allaying concerns about a bigger jump and boosting the case for the Federal Reserve to trim rates. Lower borrowing costs typically benefit non-yielding precious metals.  

 

In China, markets are closed this week for the Lunar New Year holiday. Demand for precious metals in the country has been frenetic in recent months, prompting authorities in the retail hub of Shenzhen to issue a stark warning against “illegal gold-trading activities,” ranging from apps offering leverage to retail investors to online live streams promoting bullion sales.

 

“With China and parts of the broader Asian market on holiday, gold is likely to see thinner liquidity and a quieter tone in early-week trade,” said Hebe Chen, an analyst at Vantage Markets in Melbourne. Recent price moves reflect “orderly consolidation and light profit-taking” after the push above $5,000 that followed Friday’s US inflation numbers, she said.

 

Gold surged to a record above $5,595 in late January as a wave of speculative buying drove a multiyear rally to breaking point. An abrupt, two-day rout at the turn of the month dragged it back below $4,500, but bullion has since regained roughly half of its losses in choppy trading.

 

Many banks expect gold to resume its upward trend, arguing that the drivers behind a multiyear rally remain in place — including geopolitical tensions, questions over the Fed’s independence, and a broader shift away from traditional assets such as currencies and sovereign bonds. ANZ Group Holdings Ltd. said it expects bullion to hit $5,800 an ounce in the second quarter, joining a chorus of financial institutions that have forecast higher prices.

 

“Structurally, the metal continues to demonstrate resilience — the macro backdrop has been firm but not disruptive, and technical support remains intact,” Chen said.

 

Spot gold fell 0.6 per cent to $5,012.44 an ounce as of 9:00 a.m. in Singapore. Silver dropped 1 per cent to $76.66 an ounce. Platinum and palladium also traded slightly lower. The Bloomberg Dollar Spot Index, a gauge of the US currency, edged up 0.1 per cent.