- Gold futures plummeted overnight by around 8% amid profit-taking.
- Gold’s structural demand keeps the dip-buying interest intact.
- Gold traders look forward to inflation data and the Fed policy path for directional bias.
Gold futures captured renewed attention as a hedge against systematic risk. On Tuesday, the precious metal saw the steepest single-day decline in the past twelve years, dropping more than 8%, after surging to record highs near $4,400.
The downfall was attributed to profit-taking and improved risk sentiment amid US-China trade talks. The volatility shows how upside momentum remains resilient even as caution flickers.
Two major structural forces have driven bullion’s trajectory. First, the central bank continues accumulating gold aggressively despite higher prices. For example, holdings of the Reserve Bank of India crossed $100 billion mark recently, reaching a historic high level. It reflects around 15% share of India in global gold reserves.
Such a move shows sovereigns recalibrating away from traditional FX reserves towards long-term safety. Second, the backdrop of an easing Fed remains supportive for the precious metal. With US yields in a downtrend, the opportunity cost of holding non-yielding yellow metal lowers, boosting demand for gold.
The macro landscape continues to favor gold beyond the institutional picture. The continued US government shutdown, US-China trade friction, and global geopolitics push investors towards safe-haven assets.
Meanwhile, the forward-curve structure and futures positioning indicate that investors are increasingly comfortable with gold’s durable baseline, which is not only a short-term spike. Due to de-dollarization, market participants view gold less as a near-term tactical trade and more as a strategic asset.
Despite these supportive factors, headwinds cannot be ignored. The recent sharp rally has sparked profit-taking and increased volatility, especially when leverage traders face margin pressure and stop-loss cataracts.
However, the dip-buying interest remains intact as the price found strong buying traction near $4,000, shedding around half of its losses on Wednesday morning. The demand for jewelry in China has also ticked up. However, the World Gold Council states that investment-driven and reserve buying are more impactful than traditional consumption.
Looking forward, gold futures will likely stay sensitive to four catalysts:
- US inflation data due this week
- Fed policy path
- Geopolitics, especially around US-China trade
- Central bank accumulation trends
Given the structural demand, gold futures remain buoyant even if the momentum cools, and they are looking to post fresh record highs.
