Gold prices dipped on Thursday as investors prepared for futures selling linked to an annual commodity index rebalance and responded to a slightly firmer U.S. dollar that made the metal more expensive for holders of other currencies. Spot gold retreated about 0.7%, with February U.S. gold futures also lower, reflecting repositioning ahead of the rebalance period when index funds adjust holdings to reflect updated weightings. Traders said the stronger dollar added to selling pressure after several sessions of gains, while broader risk sentiment also influenced flows into and out of precious metals.

The annual rebalancing exercise can trigger significant flows in commodity futures markets, affecting not just precious metals but energy and agricultural commodities as well. Investors monitor these shifts for signals about broader risk appetite.

While gold’s long-term fundamentals remain supported by geopolitical uncertainty and inflation expectations, short-term technical factors have prompted traders to lock in gains.

Currency dynamics, especially the dollar’s performance, are closely watched as they directly influence dollar-priced commodities; a firmer dollar can dampen demand from non-U.S. buyers.

Looking ahead, bullion markets will likely respond to upcoming macroeconomic data, including U.S. employment figures and inflation readings that could reshape interest-rate expectations and gold’s appeal as a hedge.

Source: Reuters.