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Economic stimulus and low interest rates have helped boost precious and base metals this year, and investors are wary that economic growth and inflation will spur the Fed to pull back support.
Money managers pared long positions in gold and copper last week, US data showed Friday.
“If Fed Chair Jerome Powell sticks with the central bank’s current stance of transitory price increases and no pullback in stimulus at his press conference on Wednesday, gold should be able to regain the ground it has lost,” Commerzbank AG analyst Carsten Fritsch said in a note to Bloomberg.
“Last week, gold struggled to make gains past $1,900, which may have resulted in pressure from technical traders,” said ABN Amro Bank NV strategist Georgette Boele. Monday’s drop also took prices out of an uptrend seen since early April.
“The price action suggests that the speculative market was heavily long (on gold), as of Friday and that the culling of positioning continues in Asia today,” Jeffrey Halley, senior market analyst at OANDA, said in a Reuters note.
“Gold has support at $1,856 an ounce, but the $1,840 to $1,845 zone must hold to keep the bullish case on track,” Halley added.
(With files from Bloomberg and Reuters)
