XAU/USD Declines 1% On Profit-taking, Broad Stock Selloff

Gold prices experienced a decline of over 1% on Monday, falling below the $2,750 level. This downturn was primarily driven by a confluence of factors. Firstly, profit-taking by investors contributed significantly to the gold price decline. Secondly, the emergence of DeepSeek, a Chinese artificial intelligence firm, triggered a broader market sell-off. DeepSeek’s launch of a competitively priced language model raised concerns about potential overvaluation within the AI sector, prompting investors to reassess their positions in AI-related stocks.

This market uncertainty, despite a fall in US Treasury bond yields, dampened the appeal of gold as a safe-haven asset. Furthermore, China’s latest PMI data revealed contractions in both the services and manufacturing sectors, raising concerns about global economic growth. This negative economic data further exacerbated the bearish sentiment.

Technical Outlook: Gold prices have retraced and are currently consolidating below the $2,750 level. A potential pullback towards $2,700 is possible before a renewed attempt to challenge the record high of $2,790.