Gold prices have rebounded after experiencing their most significant slump in over a decade. Spot gold rose by 3.5 per cent to $US4822.99 an ounce at 11.30am AEDT, according to Bloomberg data. This recovery follows a substantial drop from last week’s record high of $US5602 an ounce, with prices plunging by as much as $US1200 at one stage overnight.
The precious metal’s value had been steadily increasing throughout January, driven by renewed concerns surrounding geopolitical instability, currency debasement, and perceived threats to the independence of the US Federal Reserve. However, the rally faltered last Friday following news that US President Donald Trump intended to nominate Kevin Warsh to lead the US Federal Reserve.
This announcement triggered a strengthening of the US dollar and dampened sentiment among investors who had anticipated a weaker currency under the Trump administration. Market analysts view Warsh as a monetary hawk, known for his strict stance on inflation. His potential appointment has raised expectations of a tightening of monetary policy.
The shift in expectations regarding US monetary policy has prompted investors to reassess their positions, contributing to the volatility in the gold market. The rebound suggests some investors believe the previous sell-off was overdone, while others remain cautious, awaiting further clarity on the direction of US economic policy.
