Why Did Gold Fall During the Selloff?
Gold prices came under sharp pressure again after a major selloff in technology stocks triggered panic in global markets. This situation seems counterintuitive to gold's long-standing reputation as a safe haven asset. However, in a major selloff across assets, gold doesn't always immediately become a refuge. In fact, gold can be sold off as investors seek quick liquidity.
The selloff began with a sharp correction in technology and semiconductor stocks, particularly stocks that had previously surged on the hype surrounding artificial intelligence (AI). When concerns arose that large spending by technology companies might not yield expected returns, investors began trimming their positions. This pressure then spread to global markets, prompting market participants to seek risk reduction.
In such conditions, gold is often treated as a source of cash. Investors experiencing losses in stocks or experiencing margin pressure can sell gold to cover liquidity needs. Because gold is highly tradable, this precious metal is often the first asset to be disposed of when the market needs quick cash. This is why gold can fall sharply even when market sentiment is negative.
Pressure on gold is intensified by the strengthening of the US dollar. A strengthening dollar makes gold more expensive for buyers using other currencies, potentially weakening global demand. Furthermore, expectations that the Federal Reserve could raise interest rates further make gold less attractive, as it does not provide the same yield as bonds.
Geopolitical factors have also reduced gold's appeal. Progress in peace talks between the United States and Iran, as well as the recovery in tanker activity in the Strait of Hormuz, have reduced demand for safe havens from the war. When the risk of conflict is perceived to have subsided, some investors no longer feel the need to increase their gold positions as a hedge.
Therefore, the current decline in gold is not caused by a single factor. The combination of a sell-off in technology stocks, the need for liquidity, a strong US dollar, expectations of high interest rates, and easing geopolitical risks are putting multiple pressures on gold. In the short term, the market will be watching to see whether gold can hold its key psychological area or fall under further pressure if US inflation data reinforces the Fed's hawkish stance.
In the Asian session, gold is expected to remain vulnerable to weakening as long as it remains below the US$4,110–US$4,125 range. If the price falls below US$4,090, selling pressure could push gold towards US$4,075, US$4,060, or even US$4,040. However, if it can rebound and break through US$4,125, gold has the potential to retest the US$4,145–US$4,165 area. For now, the US$4,095 area is a key point in determining whether gold will continue its correction or attempt a technical recovery. (Asd)
Source: Newsmaker.id
