Gold Prices Dip Below $2,400 After Reaching Record High amid Speculations of Overextension in Rally

Gold Prices Dip Below ,400 After Reaching Record High amid Speculations of Overextension in Rally

(Bloomberg) — Gold fell after hitting a new record high as investors booked profits in a price rally seen as overly prolonged.

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Bullion broke the $2,400 an ounce mark for the first time Friday morning, climbing 2.5% to $2,431.52 before erasing its gains to fall 1.4%. The rapid intraday reversal is not uncommon for the precious metal, as its daily movement has been largely driven by economic data and interest rate expectations over the past few months.

“Markets have become rather disorderly as convexity comes into play and trading just starts in the high digits,” said Nicky Shiels, head of metals strategy at Geneva-based MKS PAMP SA.

The precious metal has gained more than 13% so far this year, surpassing the 13% gain recorded for all of last year. Its rebound and often outsized moves have left some observers perplexed due to the lack of obvious triggers — especially as prospects for interest rate cuts by the Federal Reserve have become murkier in recent weeks.

“We believe the market has become too large and this will lead to a liquidation sale,” said Philip Newman, chief executive of consultancy Metals Focus. “Any sell-off, any correction would be short-lived and present a very strong buying opportunity.”

Gold’s 14-day relative strength index was hovering near 80, well beyond the level some investors consider overbought, pointing to a potential pause.

Bullion is still on its way to its fourth weekly gain, the longest winning streak since the start of 2023.

Earlier on Friday, gold was boosted by heightened tensions in the Middle East. Israel is preparing for an unprecedented direct attack by Iran on government targets as early as Saturday, according to sources familiar with Western intelligence assessments, a move that could potentially trigger an all-out regional war.

Other factors, including geopolitical and financial risks, as well as concerns about persistent long-term inflation are supporting prices. Central bank purchases, led by China, added some bullish momentum.

Spot gold was down 1.3% at $2,341.14 an ounce as of 2:39 p.m. in New York.

Silver has seen a similar turnaround as gold. The white metal fell as much as 1.4% after climbing as high as $29.797 an ounce, the highest since February 2021.

Platinum and palladium wobbled while the Bloomberg Dollar Spot Index traded at its highest level since November. A stronger U.S. currency typically poses a headwind for greenback-denominated commodities because it can blunt interest from foreign buyers.

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