Gold Ends Nine-Week Winning Streak After Sharp Correction As Market Reassess Rally

The yellow metal Gold ended its nine-week winning streak, after a sharp correction as the market revaluated a rally that send the precious metal into overvalued territory.

The safe haven asset pared losses on Friday after a softer than expected US inflation report buoyed bets on further monetary easing by the US Federal Reserve. The bond yields inched closer as traders priced in a high likelihood of two interest rate reductions before the year is over.

Meanwhile, the lower rates typically benefit bullion as it pays no interest.

On the other hand, investors continue to weigh in US-China trade ties ahead of the Xi-Trump meet scheduled next week to improve relations.

A trade deal would relieve some of the geopolitical tensions that have bolstered demand for haven assets including gold.

In mid-August, the gold rallied to an all-time high of USD 4,381.52 per ounce on Monday only to halt the following day.

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The slump period coincded with a large outflow from gold-backed exchange-traded funds, which on Wednesday posted the biggest single-day decline in tonnage terms in five months, according to Bloomberg data.

“The correction looks to be stabilizing, but broader retail participation means volatility will likely remain elevated,” said Saxo Capital Markets Pte strategist Charu Chanana, citing a Bloomberg report.

“The next key resistance sits near $4,148, but a clear break above $4,236 may be necessary to confirm that upside momentum is back.”

Gold is up by 57% this year, with central-bank buying and the so-called debasement trade — in which investors avoid sovereign debt and currencies to protect themselves from runaway budget deficits — providing support.

Spot gold fell 0.3% to close at $4,113.05 an ounce at 5 p.m. in New York, bringing the weekly loss to 3.3%. Silver, which reached a record last week above $54 an ounce, dropped, signalling a weekly loss of above 6%.