Gold prices were under pressure on Monday as the dollar and US Treasury yields rose, denting demand for the precious metal.
Easing concerns over a bigger conflict in the Middle East also dampened safe-haven demand for the yellow metal on Monday.
At the time of writing, the December gold contract on COMEX was at $2,744 per ounce, down 0.4% from the previous close.
Even as gold prices were in the red, experts believe that the bullishness remains intact for the precious metals. Gold has risen more than 30% since the start of the year.
Tensions ease after Israeli strikes
Geopolitical tensions eased after Israel attacked Iran over the weekend.
Israel did not target Tehran’s oil and nuclear facilities, which would have escalated the conflict in a bigger way.
Missiles were fired in three waves before dawn on Saturday against missile factories and other sites near Tehran and western Iran.
Iran threatened to retaliate, but the country reportedly downplayed the impact of Israeli strikes. The prospect of Israel hitting oil and nuclear facilities in Iran had built up safe-haven demand for gold over the last few weeks.
However, Israel’s attack did not affect any nuclear sites or disrupt energy supplies from Iran, dragging down sentiments in the gold market.
Downside limited in gold
Even though gold prices have edged lower on Monday, experts are confident about the yellow metal’s potential for further gains.
Prices have fallen slightly from their record high of $2,772.60 per ounce touched earlier this month.
“However, the downside of the precious metal might be limited amid the ongoing geopolitical tensions and uncertainties surrounding the US presidential election,” Fxstreet.com said in a report.
Meanwhile, the purchase of gold by global central banks has supported the yellow metal over the last two years.
Analysts with Fxstreet believe that gold prices could correct somewhat to $2,670-$2,700 per ounce level in the upcoming week.
Alexander Kuptsikevich, analyst at FxPro Financial Services Limited, said in a report:
This won’t break the strong bullish trend. But a decisive break below will make us cautious in anticipation of a deeper pullback.
Potential in palladium’s rally
Palladium was the best-performing asset class among all the precious metals last week.
The rise in prices was fueled by the US’ call on G7 countries to impose sanctions on the Russian palladium supply. Russia supplies about 40% of the world’s palladium.
At the start of last month, palladium broke above its 50-day and then its 200-day moving averages within days of each other. In October, the approach to these levels provided support for buyers, according to Fxstreet.
Kuptsikevich said in the report:
Given palladium’s low liquidity compared to gold and even silver, strong price movements cannot be ruled out. From current levels near $1170, the next and easy target to the upside is $1200, the peak at the end of last year.
The 200-day moving average lies at $1,700 per ounce, breaking which would propel prices to even further heights.
This could also mean a repeat of the explosive rally from late 2018 to March 2020, Kuptsikevich said.
At the time of writing, palladium futures on the New York Mercantile Exchange were around $1,200 per ounce, rising 9% since the beginning of last week.
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