(Bloomberg) — Gold prices fell after rising to a new record high as investors booked profits in a price rally that was seen as overdone.
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Gold bullion broke $2,400 an ounce for the first time early Friday, rising as much as 2.5% to $2,431.52, before recouping gains and falling as much as 1.4%. The quick turnaround within a day is not unusual for the precious metal, as its daily movement in recent months has been largely driven by economic data and interest rate expectations.
“Markets have become quite choppy as convexity sets in and it’s just starting to trade big number to big number,” said Nicky Shiels, head of metals strategy at Geneva-based MKS PAMP SA.
The precious metal is up more than 13% so far this year, surpassing the 13% rise recorded for all of last year. The bounce and often outsized moves have puzzled some observers because there are no obvious triggers – especially as prospects for rate cuts by the Federal Reserve have dimmed in recent weeks.
“We believe the market is overextended and that this will lead to a liquidation sale,” said Philip Newman, managing director of consultancy Metals Focus. “Any liquidation, any correction would be short-lived and would represent a very strong buying opportunity.”
Gold’s 14-day relative strength index hovered near 80, well above the level some investors view as overbought, signaling a possible break.
Bullion is still on track for its fourth weekly advance, its longest winning streak since the start of 2023.
Earlier on Friday, gold prices were boosted by rising tensions in the Middle East. Israel is preparing for a direct and unprecedented attack by Iran on government targets as early as Saturday, according to people familiar with Western intelligence assessments, a move that has the potential to trigger a full-scale regional war.
Other factors, including geopolitical and financial risks as well as concerns about long-term inflation, are supporting prices. Central bank purchases, led by China, have provided some upward momentum.
Spot gold fell 1.3% to $2,341.14 an ounce at 2:39 p.m. in New York.
Silver experienced a similar turnaround as gold. The white metal fell as much as 1.4% after earlier rising as high as $29,797 an ounce, its highest since February 2021.
Platinum and palladium fluctuated while the Bloomberg Dollar Spot Index traded at its highest level since November. A stronger U.S. currency is typically a headwind for commodities priced in U.S. dollars because it can dampen interest from foreign buyers.
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