Despite its status as a safe haven amidst global trade uncertainties, gold prices have seen a decline for the third consecutive session.
Over the past week, gold has dropped nearly three per cent in US dollar terms, following a steady rise since the onset of 2024, as reported by .
This drop coincides with a worldwide slump in stock prices in the wake of US President Donald Trump's comprehensive tariffs, which economists fear could plunge the world into recession.
On the day of Trump's tariff announcement, the precious metal performed robustly, momentarily reaching a new all-time high of $3,225 after the president disclosed tax figures by country, before settling back to $3,125.
However, it has since pulled back, even briefly dipping below the coveted $3,000 mark this morning.
The depreciation in gold prices has occurred despite a fall in the value of the US dollar against other major currencies: when measured in euros, gold has declined almost six per cent since Thursday morning.
What is driving the fall in gold prices?
While tariffs may play a significant role, analysts at Tatton Investment Management suggest that the end of the financial year last week may have distorted gold markets due to portfolio rebalancing.
Given gold's strong performance in recent months, it would have become over-represented in many stockpicker portfolios, leading to a temporary sell-off to adjust proportions, according to the investment firm's analysts.
As the broader market took a hit, many investors were likely compelled to liquidate their positions in gold, resulting in downward pressure on its price.
"Margin calls from brokers is likely to have exacerbated some of the market movements," offered Susannah Streeter, head of money and markets at Hargreaves Lansdown.
She went on to say: "Investors using more risky margin accounts can borrow money to invest, but falls in asset prices are prompting demands they deposit more money, as the value of assets used as collateral falls."
Moreover, Streeter observed that increased unease among investors has led many to cash in on profits accrued over the past year and pivot to cash holdings.
Alternatively, Michael Brown, a senior research strategist at Pepperstone, attributed the decline in gold's value to the unwinding of tariff risk premium following an exemption of bullion imports from tariffs.
Despite the decrease in price, the strategist maintained that this was not "representative of a lack of haven demand" and expressed that he remained optimistic about the outlook for the precious metal.
