Why has gold abandoned all-time high?

Gold price has reached an all-time high on Monday, driven by the US dollar’s decline and traders’ bets that the Fed will cut interest rates next year.

Gold is trading at $2025.21 at the time of writing. Earlier on Monday, gold price surged up to 3% to $2135 per ounce, a new record, before slipping to $2066 per ounce. This rise was driven by a 3.1% fall in the dollar against six other currencies since November, leaving it slightly above its lowest level in nearly four months.

Gold’s earlier gains were the latest leg in a powerful rally that began in November last year, driven by rampant central bank purchasing and investor concerns over the conflicts in Ukraine, Israel, and Gaza.

Gold reached its previous record high of $2072.49 per ounce in August 2020 when the coronavirus pandemic hit the US economy. The recent fall in bond yields has added extra impetus to gold’s 12% ascent so far in the fourth quarter.

Fed chair Jerome Powell warned on Friday that the central bank could increase rates further but added that policy was already in “restrictive territory.”

Analysts warned that gold may struggle to hold on to gains and trade consistently above the $2,075 per ounce mark unless more sustained buying comes through from a broader range of market participants.

Gold prices retreat from fresh record highs at $2,150 with US yields picking up, and investors turn cautious on geopolitical tensions ahead of a busy data week.

Fundamentals remain favouring Gold amid a combination of softer inflation and weaker US macroeconomic data. The ISM Services PMI, ADP report on private-sector employment, and the US crucial NFP report will attract attention.

A survey by the World Gold Council shows that 24% of all central banks are planning to build up their Gold reserves in the next 12 months due to concerns about the USD as a reserve asset.