Gold prices fell sharply this week, but is there a need to worry?
World gold prices fell by more than 5% this week, the sharpest decline in five years. Despite the deep correction, experts believe the long-term upward trend is not yet over.
After nine consecutive weeks of gains, global gold prices ended their upward trend as the market failed to recover from Tuesday's sharp sell-off. In just one day, gold prices fell by more than 5%, marking the steepest drop in five years.
Despite holding above the $4,000/ounce support level, gold prices are heading for a decline of around 3% this week, with the spot price currently hovering around $4,111/ounce.
Analysts believe that the high volatility makes it difficult to determine the bottom of gold prices at the moment. The market needs time to rebalance after a period of rapid increase.
Before its sharp decline, gold prices were the focus of a wave of speculation, with capital flowing heavily into ETFs and small-scale futures contracts. Many individual investors contributed to pushing gold prices up by more than $1,000 in just a few months, a surge so rapid that the market was forced to correct.
Despite short-term corrections, the fundamental factors supporting gold prices remain very strong. Just last week, US public debt exceeded $38 trillion, an increase of $1 trillion in just one month. The rate of US borrowing has now doubled since 2000, and this situation is exacerbated by the partial government shutdown. With rising debt and high inflation, gold continues to be seen as a safe haven asset, helping investors maintain purchasing power amidst currency devaluation.
It's not just the US; global public debt is at an unsustainable level. This is the reason why gold prices have hit record highs against most major currencies this year, solidifying gold's position as a global reserve asset.
Many experts believe that despite significant fluctuations, gold prices around $4,000 per ounce are still considered low compared to risky assets like US stocks, which are at record highs.
With the economic environment highly uncertain, the trend of buying when gold prices fall will continue. Experts predict that if the upward price trend of the past three years is repeated, this correction will only be short-lived.
Despite a turbulent past week, gold investors still have reason to believe in the prospect of a rebound in gold prices in the near future.
Next week, the gold market will continue to monitor monetary policy decisions from the Fed, the Bank of Canada, Japan, and Europe.
Despite US inflation remaining above the 2% target, investors expect the Fed to cut interest rates by 0.25 percentage points. Some analysts warn that gold prices could retest the $3,800 support level if the market reacts negatively to the Fed's decision.
However, given the geopolitical instability and increasing demand for safe-haven assets, gold prices are likely to regain upward momentum towards the end of the year, heading towards the $4,400/ounce mark.