EBC Markets Briefing | Gold steadies above 2,400 after profit-taking

Gold prices steadied above $2,400 in early Asian hours on Monday. Bullion fell more than 2% in the last trading session as profit taking kicked in following its jump to an all-time peak.

On the physical side, Asian gold demand was sluggish last week, reflecting customers' reluctance to make new purchases despite deep discounts, who were instead seen capitalizing on record-high bullion prices.

But China still has plenty of appetite for gold despite pausing in May and June, as its holdings remain low as a share of reserves and geopolitical tensions persist, according to industry experts and data.

The PBOC started reporting gold purchases and kept doing so for 18 months after Western sanctions froze Russia’s assets. It was the world’s largest single buyer in 2023, the WGC said.

Even so, gold's share of China's overall reserves, which include its reserve position and SDRs at the IMF, while at a record high of 4.9% is low compared to the global average of 16%.

Speculators raised their net long positions in the yellow metal to the highest in more than 2 years last week, according to the CFTC data. Global gold ETFs saw inflows two months in a row last month.

Gold has seen solid support around the $2,400 level. The 50 SMA could be the key to whether its short-term uptrend will continue. It must clear $2,450 again to bolster the case for another record high.

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