Gold prices retreated in the first trading sessions of 2026, pulling back from recent record highs amid thin market liquidity and profit-taking, according to an analysis by Gold Bullion. Spot gold declined 4.4% over the past week, falling to a two-week low of $4,274 per ounce after opening the week at $4,542. Prices later recovered some losses, ending the week at $4,332 per ounce, the firm's technical analysis showed. The metal entered 2026 following a sharp rally in 2025, when prices surged nearly 65% year-on-year—marking gold's strongest annual performance since 1979. That rally was fueled in part by expectations that the U.S. Federal Reserve will begin cutting interest rates, with markets currently pricing in two rate cuts during 2026. Lower interest rates typically reduce the opportunity cost of holding non-yielding assets such as gold, making the metal more attractive to investors. Additional support over the past year came from a weaker U.S. dollar and easing inflation concerns, both of which boosted demand for gold. Geopolitical risks remain a potential catalyst for renewed safe-haven buying. Reports of repeated attacks in Venezuela's capital—believed by some sources to involve U.S. action—could support gold demand once markets return to full activity next week, the analysis noted. Gold Bullion attributed the recent volatility primarily to reduced liquidity and lower trading volumes during the holiday period, which weakened upward momentum and encouraged profit-taking. Despite the pullback, prices have so far remained above the $4,300 per ounce level. Market views on gold's short-term outlook remain divided. Some analysts warn that prices may be entering overbought territory following last year's rally, increasing the risk of a near-term correction. Others highlight continued central bank purchases as a key source of underlying support, citing ongoing diversification of foreign exchange reserves into gold. Physical demand showed signs of improvement in Asia after the recent price correction. In India, dealers charged premiums of up to $15 per ounce over official domestic prices this week, compared with a discount of $61 per ounce last week. In China, prices shifted from a discount to a premium of around $3 per ounce above the global spot benchmark, reflecting improved consumer demand.
