Gold prices fell more than 1% on Monday, impacted by a global market sell-off driven by mounting economic concerns. The metal, often seen as a safe haven, experienced its biggest single-day drop since early June.
Market Impact and Recovery
Spot gold fell as much as 3.2% to $2,365.55 per ounce before recovering to $2,403.37 per ounce by midday. US gold futures also dropped 1.0% to $2,445.10 per ounce in New York, though they remained above the $2,400 level throughout the session.
Despite Monday’s sharp decline, gold is still up about 18% year-to-date, having hit an all-time high in July. This surge was driven by central bank buying and strong demand from Asian consumers, with the metal crossing the $2,500 mark for the first time ever last week.
The recent drop in gold prices came amid broader market fears of a potential US recession, spurred by weak economic data last week. “Margin calls ahead of the New York opening have forced traders to liquidate winning positions in gold to cover their losses on stocks,” said Adrian Ash, director of research at BullionVault.
In times of market crashes, it’s common for gold to fall alongside equities, although it typically drops less and stabilizes sooner. Analysts believe that despite the current downturn, gold could regain its footing due to ongoing economic and political uncertainties, and the possibility of future interest rate cuts.
Gold’s Resilience and Investor Behavior
Gold has historically been considered a safe-haven asset, particularly during times of economic and geopolitical instability. Expectations of rate cuts by the US Federal Reserve and rising geopolitical tensions in the Middle East have provided strong support for gold prices in recent months.
“Virtually every time there is marked equities weakness, investors who hold gold as a risk hedge will liquidate part of their holdings to raise liquidity against any potential margin calls,” said Rhona O’Connell, an analyst at StoneX Financial. She added, “When the dust settles, they almost invariably buy it back.”
As markets continue to fluctuate, gold’s performance will likely be closely watched by investors seeking to hedge against broader economic risks. With the persistent uncertainties ahead, gold may continue to be a favored asset for those looking to protect their investments.
Source: Mining.com
