Gold edged higher in early Asian trading Monday after falling 18% from its January record. United Overseas Bank said the long-term outlook remains positive despite the selloff driven by elevated energy prices and rate hike expectations.
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Gold rises in early trade after 18% retreat from January record
Gold edged higher in early Asian trading Monday after falling 18% from its January record above $5,600 an ounce. The yellow metal has been under pressure as elevated energy prices from the Middle East conflict stoke inflation fears and boost Treasury yields, raising expectations the Federal Reserve will keep interest rates higher for longer. United Overseas Bank said the long-term outlook for gold remains positive despite the recent selloff.
Gold rose in early Asian trading, recovering from an 18% decline from its January record above $5,600 an ounce.
"The long-term outlook for gold remains positive despite the recent pullback from the $5,000 level," a United Overseas Bank strategist said.
Spot gold traded at $4,466.28 an ounce as of Friday's London fix, according to LBMA data. The metal hit a record $5,477.79 in late January before retreating as the US-Iran conflict pushed crude prices higher, reinforcing inflation expectations and boosting bets on Fed rate hikes. COMEX gold futures fell more than 3% to $4,342 an ounce Friday after stronger-than-expected US jobs data reinforced expectations the Fed will raise rates this year.
Gold has lost nearly 18% since the Middle East conflict began, erasing its year-to-date gains. The Federal Reserve's June policy decision is the next catalyst, with markets pricing a higher probability of a rate increase after the jobs report.
Central banks bought 243.7 metric tonnes of gold in the first quarter, up 3% year-over-year, according to World Gold Council data. Poland and China were among the leading buyers, continuing a structural shift toward reserve diversification that has seen gold surpass US Treasuries as a share of central bank reserves for the first time since 1996.
Consumer demand has weakened at current price levels. Global jewellery demand fell 25% to 260.2 tonnes in Q1, with Chinese demand dropping 31% year-over-year to 85.2 tonnes and Indian demand slipping 19% to 66.1 tonnes, World Gold Council data shows.
Gold at $4,466.28 an ounce remains 36% above its 52-week low of $3,267.56 and 18% below its all-time high of $5,477.79.
This article is for informational purposes only and does not constitute investment advice.
