Market News

Sybilla Gross

(Bloomberg) -- Gold is set to snap a nine-week winning run, following a sharp correction as the market reassessed a rally that had pushed the metal into overbought territory.

Bullion slipped to near $4,112 an ounce on Friday, putting it on track for a weekly decline of more than 3%, the most since May. Investors continued to weigh prospects for improved US-China relations, with President Donald Trump and his counterpart, Xi Jinping, set to meet next week in an effort to deescalate a simmering trade war. A deal would relieve some of the geopolitical tensions that have bolstered demand for haven assets including gold.

A scorching run that began in mid-August and pushed prices to an all-time high of $4,381.52 an ounce on Monday came to a screeching halt the following day, with investors taking profit. The slump coincided with a large outflow from gold-backed exchange-traded funds, which on Wednesday posted the biggest single-day decline in tonnage terms in five months, according to data compiled by Bloomberg.

“The correction looks to be stabilizing, but broader retail participation means volatility will likely remain elevated,” said Saxo Capital Markets Pte strategist Charu Chanana. “The next key resistance sits near $4,148, but a clear break above $4,236 may be necessary to confirm that upside momentum is back.”

Gold is up by around 57% this year, with central-bank buying and the so-called debasement trade — in which investors avoid sovereign debt and currencies to protect themselves from runaway budget deficits — providing support. Bets that the Federal Reserve will deliver two quarter-point rate cuts by the end of the year have also boosted the appeal of non-interest bearing bullion.

Before it dropped this week, technical indicators had shown bullion had been at overbought levels for most of the time since early September. Traders have piled into options to protect against the potential for further gyrations in gold prices. One-month implied volatility remains elevated, after surging to its highest since 2022 earlier this week.

“We view this price fall as a healthy correction rather than a reversal of the uptrend,” ANZ Group Holdings Ltd. strategists including Soni Kumari said in a note. “Further price declines are possible, but a deeper correction will likely spur more fresh buying from both investors and retail consumers, as the structural supportive factors remain in place.”

Investors are waiting for Friday’s US consumer price index report. A gauge of the dollar edged higher ahead of the release, which will offer the first real glimpse on the state of the economy since the start of a government shutdown.

Platinum, meanwhile, jumped as much as 2% before paring gains. The market for the metal in London is showing signs of significant tightness, with prices spiking to a premium of more than $70 an ounce over New York futures on Wednesday. Lease rates have also surged, with the moves echoing the dynamics seen in silver after a liquidity crisis earlier this month.

Spot gold fell 0.3% to $4,112.17 an ounce at 1:54 p.m. in Singapore. Silver, which reached a record last week above $54 an ounce, dropped — putting it on track for a weekly loss of more than 6%. The Bloomberg Dollar Spot Index was up 0.1%, while palladium declined.