Gold prices were lower Tuesday, giving back some of the gains made Monday when the yellow metal reached a 5-week high.
February Comex gold was down US$22 to US$1,196 an ounce early Tuesday.
Spot gold dropped almost $15.30 to $1,198
Published reports said Monday’s action was driven by a number of factors, including heavy short covering, buy stop orders triggered in the futures market, and a flurry of bargain hunting in the cash market.
But the rally caught some observers by surprise.
“A drop in the price of gold (Monday) would have been easier to understand after Swiss voters overwhelmingly rejected proposals on Sunday to boost gold reserves,’’ said Martin Murenbeeld, chief economist with Dundee Capital Markets.
Murenbeeld said he was surprised when he arrived at his office Monday morning and saw that gold was trading at over US$1,190 an ounce. “I expected that the NO vote would have put gold under pressure,’’ he said.
A surprise ‘yes’ vote in Sweden would have led to the Swiss central bank buying about 1,500 tonnes of gold over the next few years, analysts told Reuters News Service.
Markets were under pressure Monday after a hoped-for production cut by OPEC failed to materialize. However, the price of oil rebounded, rising as much as 5% to mark the biggest daily gain since 2012.
Murenbeeld said he expects to see gold trading at between US$1,175 and US$1,250 in the short term.