Gold prices remained little changed on Monday, trading below monthly highs as traders took profits ahead of U.S. President-elect Donald Trump’s inauguration.
By 3:05 pm AEDT (4:05 am GMT) spot gold was trading at US$2,702.79 per ounce.
The Martin Luther King Jr. Day holiday in the U.S. added to thinner market conditions, contributing to volatile price action.
The easing of geopolitical tensions in the Middle East played a key role in dampening demand for safe-haven assets such as gold. A ceasefire between Israel and Hamas was reached on Sunday after 15 months of conflict, facilitating the release of hostages and the delivery of humanitarian aid to Gaza.
Meanwhile, reports suggest Trump is preparing to sign over 50 executive orders on Monday. This, coupled with optimism over potential Chinese stimulus, has supported risk-on sentiment. Expectations that China may lower its Reserve Requirement Ratio (RRR) ahead of the Lunar New Year have bolstered confidence, given China’s position as the largest gold consumer.
Despite the current pullback, downside risks for gold appear limited. Markets anticipate that the Federal Reserve may implement two interest rate cuts this year following subdued inflation data for December. This dovish outlook for U.S. monetary policy is likely to provide a floor for gold prices in the medium term.
