Gold hits 3-week low: Are investors driving the decline?

Image credit: Getty Images

Gold prices fell to a more-than-three-week low on Monday amid a wider market sell-off, continuing their retreat as investors dumped bullion to cover their losses in other trades on fears of a global recession due to an escalating global trade war.

Read-Gold prices extends gains: What’s next for investors?

Spot gold was down 0.3 per cent at $3,027.90 an ounce as of 0331 GMT, after dropping over 1 per cent earlier in the session to its lowest since March 13.

US gold futures rose 0.4 per cent to $3,047.50.

Gold dropped more than 3 per cent on Friday, caught up in the market’s spiral after US President Donald Trump’s bigger-than-expected tariff measures rippled across global markets.

Investors selling off bullion

The drop in gold, usually a safe haven during uncertain times, made dealers speculate that investors might be selling off bullion to realise profits and potentially cover losses or margin calls on other assets.

“There’s a lot of confusion and uncertainties in the markets about whether there is room for de-escalation ahead, given that tensions are at an extreme right now, with many still struggling to see any quick resolution for now,” IG market strategist Yeap Jun Rong said.

“While some weakness in prices could be due to profit-taking, resilience still seems to be the broader theme, with safe-haven flows offering some cushion amid the market volatility.”

US tariffs

China on Friday struck back at the US tariffs imposed by Trump with a slew of counter-measures including extra levies of 34 per cent on all US goods and export curbs on some rare earth metals.

Global recession fears wiped out nearly $6tn in value from US stocks last week and caused Japan’s Nikkei share average to tumble nearly 9 per cent early on Monday.

Federal Reserve Chairman Jerome Powell said tariffs increased the risk of higher inflation and slower growth, highlighting the difficult path ahead for policymakers at the US central bank.