The prices of precious metals such as gold and silver retreated from their record highs and were trending lower today in the international market, largely due to profit booking. While both metals had touched record levels in previous sessions, easing safe-haven demand and comments by US President Donald Trump about holding off on new tariff imposition on critical metals impacted prices.
Here are the key factors impacting precious metal prices in Thursday’s trade. However, readers must remember that MCX in India is shut along with equity markets on account of Municipal Elections in Maharashtra.
#1. Profit booking by investors
Gold and silver slipped primarily due to profit booking by investors. Spot gold was trading at $4,584, down 0.8% from its previous close of $4,626. The yellow metal had hit an all-time high of $4,648 on January 14.
Spot silver was trading near the $87 per ounce level after hitting a record high of $93 in the previous session.
In simple terms, profit booking refers to investors selling assets to lock in price gains. Oftentimes, this leads to a temporary halt in the price rally.
#2 Relief on geopolitical tension
Precious metals had surged to record highs in earlier sessions amid rising geopolitical uncertainties. However, some relief emerged after Trump told reporters that plans for an attack on Iran were currently on hold. He also said he had been assured that executions of protesters in Iran had stopped.
Following these comments, prices of gold and silver saw a short pullback, as reduced geopolitical tensions tend to lower the safe-haven appeal of these precious metals.
#3 Trump shows optimism on negotiations
On January 14, the US President said he was holding off on imposing new tariffs on critical minerals. Following this, silver slumped by nearly 5% from its record high in the earlier session.
Trump added that his administration would negotiate trade agreements with foreign nations to ensure sufficient supplies of critical minerals. This easing of economic uncertainty also helped cool prices of gold and silver.
#4 Tensions between Powell and Trump ease
Gold prices, which had earlier extended gains earlier over concerns on US Federal Reserve’s independence, also eased after Trump said he had no plans to fire Fed Chair Jerome Powell.
Earlier in January, the US Justice Department had launched a criminal investigation into Powell. The Fed Chair said he believed the probe was initiated due to Trump’s anger over the Fed’s refusal to lower benchmark interest rates.
Precious metals like gold and silver generally perform well in low interest rate environments.
#5 Outlook
Despite the short retreat, analysts expect prices of precious metals to remain elevated in the longer run as geopolitical tensions show little sign of easing. Further, concerns over the Federal Reserve’s independence, along with ongoing uncertainties involving Iran and Venezuela, continue to add to the bullish momentum. Meanwhile, upcoming key US economic data will help guide the future trajectory of these precious metals.