Gold prices record biggest drop in six months

(Patria) - Gold prices recorded the biggest drop in the last six months last week, losing as much as four percent of their value, which is the most pronounced weekly loss since November.

A troy ounce of gold (31.1 grams) is now almost ten percent below its record value from April, when it exceeded the $3,500 mark.

The reasons for such a strong correction in precious metal prices lie in several parallel factors: a decrease in global geopolitical tensions, including the trade truce between the US and China; a strengthening of the US dollar, which reduces the attractiveness of gold as an alternative store of value; an increase in risk appetite, as investors are encouraged by announcements of economic recovery and the easing of trade barriers; profit-taking – investors have decided to cash in on profits after the exceptional growth of gold since the beginning of the year, which still stands at an impressive +22 percent and, additionally, with optimism in the markets, interest in so-called safe havens like gold naturally declines.

At the same time that gold is recording losses, stock market indices are growing strongly. The agreement between the US and China on the temporary suspension of tariffs for 90 days has triggered a wave of enthusiasm among investors.

The NASDAQ technology index rose by seven percent last week, while the S&P 500 grew for all five days. Positive movements were further boosted by expectations of avoiding a recession – even Barclays, which until recently predicted a drop in US GDP, now expects its growth of 0.5 percent. Conversely, Moody's downgraded the US credit rating to AA1, due to the worryingly high public debt.

Although euphoria currently dominates the market, there are also signals for caution. The University of Michigan Consumer Sentiment Index showed a further decline, while inflation expectations for the next 12 months rose to as high as 7.3 percent – the highest level since 1981. Meanwhile, some companies like Walmart warn of possible price increases for products due to Trump's tariffs, while others – like First Solar – are recording strong growth thanks to tax incentives for renewable energy sources.

In short, the market is at a transitional moment: optimism is pushing stocks upwards, while gold – a symbol of caution – is temporarily giving way to euphoria.

However, as trade negotiations and geopolitical tensions develop, the balance can change quickly, reports Bankar.me.