Gold’s down, but don’t panic

NEW YORK (May 2) Gold has been on a wild ride since early market trading, so it's not surprising that we've seen some dramatic profit-taking. However, as gold enters a new consolidation range, we want to point out again that corrections over the past two years have been short and shallow.

Although gold is ending the week with a 2% loss, analysts note that the damage to the uptrend is minimal, as prices are well off their lows at $3,200 an ounce. At its lowest point this week, gold was down about 8.5%, placing this correction in the same league as the one we saw after the U.S. election in November. Back then, gold prices topped at $2,800 before dropping 9% within three weeks.

As the cliché goes, history may not repeat, but it does rhyme. This new correction has happened more quickly, but the move is not out of character in the broader landscape. It's important to put this price action into perspective. It took only five weeks for gold to climb from $3,000 to $3,500 an ounce. With that kind of froth in the marketplace, it's not surprising that investors have been quick to take some profits off the table.

While gold still has room to fall, a growing number of analysts continue to view this sell-off as a long-term buying opportunity. Many note that although fears surrounding President Donald Trump's global tariffs have waned in recent days, there are still no clear trade deals on the table.

Some economists have said that even if trade deals were to be announced, the damage to the economy—and to America's reputation as a trusted trade partner—is already done.

Tariffs will eventually disappear, but that doesn't mean central banks will stop buying gold to diversify their portfolios and reduce reliance on the U.S. dollar.

This week, the World Bank significantly increased its gold price forecast. Last year, analysts expected prices to remain relatively unchanged after a 20% gain. In the latest update, they now see prices holding relatively steady at current levels—up 36% from last year's average.

"Strong safe-haven demand for gold is expected to persist in the near term, buoyed by uncertainty, geopolitical tensions, and concerns about volatility in major financial markets," the analysts said. "If geopolitical tensions and policy uncertainty become even more pronounced, gold prices could exceed current projections."

Even the World Bank doesn't see gold going anywhere anytime soon. And with that in mind, have a great weekend.

KitcoNews