Gold prices fell below 1965, and safe-haven demand weakened. How long will the gold correction last?

On Tuesday (October 24), gold prices continued to decline in the US market, further away from the five-month high hit last week, influenced by the strengthening of the US dollar and the rise in Treasury yields, while traders closely watched US economic data and Middle East tensions.

As of press time, spot gold fell 0.45% to $1,964.31 an ounce.

(30-Minute chart of spot gold)

COMEX most active gold futures contract Beijing time on October 24th 21:45--21:46 one minute trading disk instantly traded 2404 lots, the total value of the transaction contract 474 million dollars.

The gold market could come under further selling pressure as preliminary U.S. economic data showed better-than-expected economic activity in October, with both manufacturing and services expanding.

The preliminary Markit services PMI for the US rose to 50.9 in October, the highest since August 2023, as activity in the services sector rose to its highest level in three months, the report said.

The initial reaction to the positive economic data in the gold market has not changed significantly. However, the precious metal is facing some technical selling pressure as some traders take profits.

Chris Williamson, chief business economist at Standard & Poor Global Market Intelligence, said economic activity appears to be picking up as expectations grow for the end of the Federal Reserve's tightening cycle.

"The survey's measure of sales prices is now close to the long-run average before the pandemic and is consistent with headline inflation falling towards the Fed's 2 per cent target in the coming months, which looks likely to happen with output falling into contraction," he said.

"Improved conditions in October will encourage hopes of a soft landing for the US economy," Mr. Williamson said in the report.

After the data was released, the dollar index rose 15 points in the short term and is now trading at 106.13, up 0.51%, making gold more expensive for holders of other currencies and the benchmark 10-year U.S. Treasury yield also rose.

The two sides reached an agreement to provide aid to affected people in Gaza, and two Israeli hostages have returned home. The talks could lead to a temporary reprieve from a frenzied war. Fighting is expected to continue, of course, but Israel may be willing to delay a ground offensive to safely return more hostages.

Therefore, the gold market takes this opportunity to hedge some risks and reassess its next move.

But Jim Wyckoff, senior analyst at Kitco Metals, said: "A stronger dollar and higher yields are bad for gold today, but geopolitical risks will support gold prices. A near-term break above $2,000 is still possible, and even a new high if the Middle East crisis escalates."

Gold prices have rallied about 9% in the past two weeks, hitting a five-month high of $1,997.09 on October 20, mainly due to safe-haven inflows due to fears that Israel's war with Hamas will spread.

However, foreign exchangebrokerMarios Hadjikyriacos, senior investment analyst at XM, said in a note that gold's inability to rebound was a sign that "haven demand has started to wane as the market learns to adjust to tensions in the Middle East".

Markets are focused on Thursday's release of U.S. third-quarter GDP data and Friday's release of the U.S. PCE price index, which could affect the Federal Reserve's interest rate outlook.

According to the CME FedWatch tool, traders widely expect the Federal Reserve to maintain interest rates unchanged in November.

Mr. Wyckoff added: "If we see data showing a strong US economy and things don't explode in the Middle East, it will be bearish for gold as it puts pressure on the Fed to raise interest rates."