Gold retreats as investors liquidate positions in equities sell-off

Gold prices declined more than 1% on Monday, retreating from near-record highs seen in the last session, as investors liquidated bullion positions, along with a broader market sell-off sparked by rising interest in Chinese AI start-up DeepSeek.

Spot gold was down 1.3% at USD 2,736.75 per ounce as of 01:49 p.m. ET (1849 GMT). Prices had risen to near-record high levels on Friday. US gold futures GCcv1 settled 1.5% lower at USD 2,738.40 per ounce.

The sharp declines in global equity markets have driven risk-averse moves across other asset classes, with US Treasury yields dropping to three-week lows and the dollar index hitting its lowest levels since Dec. 18.

“This (sell-off) is very much driven by the broad equity market rather than just the normal interest rates or currency. We’re seeing a bit of a liquidity crunch,” said Bart Melek, head of commodity strategies at TD Securities.

“Some people need to maybe create liquidity in the market and maybe some of the stocks that they were leveraged on or had margin against had a big move, so I think it’s a liquidity issue and gold is being sold along with other risk assets.”

The sell-off came ahead of the US Federal Reserve’s first policy meeting of the year, where policymakers are largely expected to keep interest rates steady on Wednesday, according to the CME FedWatch tool.

However, investor focus will be on any cues regarding future policy decisions as US President Donald Trump begins his second term, with his tariff policies likely to fuel inflation.

“Gold remains fairly well bid. Safe haven demand is going to continue to support… We will ultimately break out to new all-time highs as there’s ongoing uncertainty about the Trump administration’s policy agenda,” said Peter Grant, vice president and senior metals strategist at Zaner Metals.

Spot silver fell 1.7% to USD 30.10 per ounce, after logging a 0.9% increase last week.

Palladium dipped 2.9% to USD 959 per ounce and platinum fell 0.3% to USD 945.80 per ounce.

(Reporting by Anmol Choubey and Anjana Anil in Bengaluru, additional reporting by Swati Verma; Editing by Shreya Biswas)