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Gold hits 2-1/2-week low as Middle East tensions ease

Gold prices drop

Spot gold dropped 0.8% to $2,308.85 per ounce after reaching its lowest since April 5 earlier in the session

Gold prices dropped to a more than two-week low on Tuesday amid easing concerns of an escalation in the Middle East crisis and profit-taking, while investors eyed key U.S. data for fresh clues on the Federal Reserve’s interest rate trajectory.

Spot gold dropped 0.8% to $2,308.85 per ounce, as of 0820 GMT, after reaching its lowest since April 5 earlier in the session. U.S. gold futures slid 1% to $2,322.10.

Gold has been the recipient of different types of buying flows in recent months, and now one of those flows has slightly dried up with safe-haven demand dropping. Investors are seeing this as an opportunity to lock in some profits after gold’s recent (strong) run, according to Tim Waterer, chief market analyst at KCM Trade.

Gold slipped more than 2% on Monday, its biggest intraday decline in more than a year, as concerns of a broader regional conflict eased after Iran said it had no plan to retaliate following a reported Israeli attack.

The sharp drop in gold prices overnight “may have also tripped weak longs, in turn fuelling an even larger decline,” Singaporean bank OCBC stated in a note.

The U.S. gross domestic product data on Thursday and PCE data on Friday will be on investors’ radar this week.

If these happen to produce a beat to the upside we could see a further extension of the wait for interest rate relief. Such a scenario could cause the gold price to take a larger step back, Waterer added.

Higher interest rates lower the appeal of holding non-yielding gold.

March headline PCE is likely to rise 0.3%, unchanged from the previous month, and a year-on-year gain of 2.6%, compared with a 2.5% rise in February, as per a Reuters poll.

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