Gold prices declined notably during Monday's Asian trading session, continuing to give back gains after hitting a record high last week, as market risk appetite saw a phased recovery.
In recent weeks, gold prices surged significantly, primarily driven by the pricing-in of uncertainty surrounding U.S. political and monetary policy prospects. Particularly, market concerns centered on the possibility that President Trump might push for a Federal Reserve Chair candidate more inclined towards rapid interest rate cuts, which would potentially weaken monetary policy independence and exacerbate inflation and U.S. dollar credit risks.
However, as news that Trump would nominate Kevin Warsh for the Fed Chair position gradually became digested by the market, related concerns noticeably subsided. Warsh is viewed as a candidate with a relatively stable policy stance, whose monetary policy orientation emphasizes institutional stability and inflation constraints, thereby alleviating some of the investors' previous expectations for aggressive easing policies to a certain extent.
The reduction in perceived Federal Reserve independence risk directly undermined a key logical foundation for gold's recent rapid ascent, triggering profit-taking by some long positions and consequently putting downward pressure on gold prices.
From a macro-environment perspective, the shift in market sentiment also reflects a phase of risk premium retracement. Against the backdrop of temporarily stabilized confidence in Fed policy credibility, the potential for increased stability in the U.S. dollar and U.S. Treasury yields has somewhat diminished gold's relative attractiveness compared to other assets in the short term.
The upcoming U.S. ISM Manufacturing PMI data release serves as a crucial window for the market to observe economic fundamentals and monetary policy expectations; the data outcome could further influence gold's short-term directional movement.
Despite facing short-term pressure, the medium to long-term supportive logic for gold has not disappeared. Geopolitical risks remain elevated, with tensions between the U.S. and Iran continuing to simmer. Iran's Supreme Leader recently issued a stern warning, stating that any action targeting Iran could trigger a regional conflict.
Against a backdrop where global geopolitical uncertainties are unlikely to dissipate quickly, gold, as a traditional safe-haven asset, retains its allocation value. Concurrently, sustained demand from global central banks provides structural support.
In an environment where the safety of foreign exchange reserves is questioned for some nations, gold is regarded as a more neutral reserve asset due to its independence from any single country's credit system. Some countries, observing the risk of dollar-denominated assets being frozen, have accelerated their pace of gold allocation. This long-term demand from official sectors provides a substantial buffer against significant declines in gold prices.
Looking at the daily gold chart, prices have shown a clear pullback after a rapid rally to fresh historical highs, entering a technical correction phase on the daily timeframe. The previously sustained and expanding gains caused short-term moving averages to deviate significantly from medium and long-term averages; the current retracement helps to cool down the overheated technical structure.
Prices have broken below short-term moving average support but remain within the medium-term ascending trend channel, indicating the overall uptrend is not yet broken. Momentum indicators have retreated from extreme highs, showing a clear cooling of bullish momentum, though they have not yet entered oversold territory.
Observing key price levels, technical support near $4600 is a focal point below; if this level holds effectively, gold prices are more likely to consolidate through high-level oscillation. To the upside, prices need to reclaim and stabilize above the $4900 level to resume the trend-based upward movement. The current technical configuration leans more towards a "strong correction" rather than a trend reversal.
Editor's View: This round of correction in gold prices essentially represents an adjustment to the previously excessively accumulated policy uncertainty premium. Stabilizing expectations regarding Fed personnel have led the market to reduce the intensity of pricing for extreme easing and institutional risks in the near term, triggering profit-taking.
However, from a longer-term perspective, risks of geopolitical conflict, the global trend of central bank de-dollarization, and the re-assessment of financial system safety remain crucial supportive factors for gold. Short-term volatility is inevitably increasing, but as long as macro uncertainties have not fundamentally subsided, the strategic allocation value of gold persists.
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