Gold prices dipped slightly on Monday (August 19). It was seen hovering near the key $2,500 mark, as traders booked profits after the metal surged to an all-time high on Friday (August 16).

The recent rally was driven by expectations of a US Federal Reserve interest rate cut in September.

As of 0317 GMT, spot gold fell 0.2% to $2,502.78 per ounce, while US gold futures edged up 0.2% to $2,541.80 per ounce.

In India, the price of 24-carat gold dropped by ₹353 to ₹7,201.6 per gram on Monday (August 19).

The trends

Gold’s record rally, which saw prices peak at $2,509.65 per ounce last week, has been fuelled by optimism about the US Fed’s anticipated rate cut, rising geopolitical tensions, and strong central bank buying.

These factors have propelled bullion more than 20% higher so far this year.

“Gold has been chasing the psychological $2,500 level for several months,” said Tim Waterer, Chief Market Analyst at KCM Trade.

“Now that it has been reached, we’re seeing natural profit-taking,” he was quoted as saying in a Reuters report.

US economic data and Fed expectations

Recent US economic data, including stronger-than-expected retail sales and lower unemployment claims, along with mild inflation figures, have renewed confidence in the economy.

This has increased the likelihood of a US Fed rate cut in September, with markets pricing in a 75.5% chance of a 25-basis-point cut, according to the CME FedWatch tool as quoted in the Reuters report.

Investor sentiment remains strong

Despite Monday’s dip, bullish sentiment in the gold market remains strong.

Holdings in the SPDR Gold Trust, the largest gold-backed ETF, rose nearly 1% last Friday.

COMEX gold speculators also increased their net long positions significantly last week.

In addition, several Chinese banks received new gold import quotas.

What should investors do?

With prices near record highs globally and MCX futures surging, short-term traders may consider booking profits.

However, central bank demand, potential geopolitical risks, and economic uncertainty keep gold an attractive long-term hedge.

Monitoring global developments, particularly US Fed policy decisions will be crucial in determining the next direction for gold prices.

Long-term investors may still find value in holding gold, while others may choose to wait for more clarity from the Fed’s Jackson Hole conference later this week.