Gold prices retreated on Monday as traders cashed in profits following last week’s explosive rally, with the pullback exacerbated by skeletal trading volumes as major markets remained shuttered for public holidays.
Spot gold declined 0.9% to $4,997.59 per ounce by 0726 GMT, having tumbled more than 1% earlier in the session. U.S. gold futures for April delivery shed 0.6% to $5,017.20 per ounce, as the precious metal gave back a portion of Friday’s remarkable 2.5% surge.
The subdued trading environment—with U.S. markets closed for Presidents’ Day and Chinese markets dark for Lunar New Year celebrations—provided limited support for the yellow metal, which had rocketed higher last week on the back of softer-than-expected U.S. inflation data.
“Gold has given back some of Friday’s post-CPI gains today due to thinner trading conditions and a lack of fresh upside catalysts,” explained Tim Waterer, chief market analyst at KCM Trade. He identified profit-taking as a key driver behind Monday’s weakness, with traders locking in gains after the metal’s sharp Friday advance.
Friday’s session delivered a potent catalyst for gold bulls when the U.S. Labor Department reported that the Consumer Price Index rose just 0.2% in January, falling short of economists’ expectations for a 0.3% increase and marking a deceleration from December’s 0.3% gain.
The tame inflation print reignited speculation that the Federal Reserve may have additional room to ease monetary policy this year, a scenario that typically benefits non-yielding assets like gold. Federal Reserve Bank of Chicago President Austan Goolsbee acknowledged on Friday that interest rates “could go down,” though he cautioned that services inflation remained stubbornly elevated.
Market pricing currently suggests traders expect the Fed to hold rates steady at its March 18 policy meeting. However, futures markets are still discounting approximately 75 basis points of rate cuts before year-end, with the first reduction anticipated in July, according to data compiled by LSEG.
Gold, which pays no interest or dividends, typically flourishes in low-rate environments as the opportunity cost of holding the metal diminishes relative to yield-bearing assets like bonds.
Looking ahead, Waterer suggested that further upside in gold prices may hinge on renewed weakness in the U.S. dollar. “It will likely require the dollar to resume its downtrend for gold to make a push in the direction of $6,000 before year-end,” he noted, referencing a psychological milestone that would represent another leg higher for the metal, which has already posted substantial gains in recent months.
The dollar’s trajectory remains closely tied to Federal Reserve policy expectations and broader geopolitical developments, both of which continue to inject uncertainty into global markets.
Adding to the uncertain backdrop, fresh geopolitical tensions emerged over the weekend as U.S. military officials revealed preparations for a potential extended military operation against Iran. Two U.S. officials told Reuters that the Pentagon is readying for a possible weeks-long campaign should President Donald Trump authorize an attack—an escalation that could eclipse previous confrontations between the two nations.
Such geopolitical flashpoints historically provide support for gold’s status as a safe-haven asset, though Monday’s trading suggested investors were more focused on near-term profit-taking than potential crisis scenarios.
The weakness extended across the precious metals complex. Spot silver tumbled 0.8% to $76.82 per ounce, having plunged 3% earlier in the session, a sharp reversal from Friday’s 3.4% rally. The white metal, which serves dual roles as both an industrial commodity and a precious metal, has exhibited heightened volatility in recent sessions.
Platinum slipped 0.7% to $2,048.15 per ounce, while palladium, used primarily in automotive catalytic converters, held steady at $1,685.64.
With trading volumes expected to remain suppressed until Chinese markets reopen later this week, precious metals may continue to see choppy, range-bound price action in the near term. Traders will be watching upcoming economic data releases and any fresh commentary from Federal Reserve officials for clues about the monetary policy outlook that has become central to gold’s recent trajectory.
WHAT YOU SHOULD KNOW
Gold pulled back nearly 1% on Monday as traders locked in profits after Friday’s 2.5% rally, with thin holiday trading amplifying the decline. The key takeaway: Gold’s recent surge was fueled by softer U.S. inflation data that boosted expectations for Federal Reserve rate cuts later this year—markets are pricing in 75 basis points of cuts starting in July.
However, further gains toward the $6,000 level will likely depend on continued dollar weakness.
With U.S. and Chinese markets closed for holidays, low liquidity made prices vulnerable to profit-taking, though the underlying bullish case for gold remains intact as long as rate cut expectations hold.
