(Kitco News) - Although gold was caught in the broad selling frenzy on Monday, the precious metal is still doing what it is supposed to do, as it has lost less ground than the S&P 500 and the Nasdaq.
Ahead of the North American open, S&P 500 futures were down more than 2%, and Nasdaq futures were down nearly 4%. Despite the selling pressure, gold has managed to hold initial support above $2,750 an ounce.
As of 8:58, February gold futures last traded at $2,760.10 an ounce, down 0.68% on the day. At the same time, the S&P 500 last traded at 5,997 points, down 136 points or more than 2% on the day.
According to equity analysts, markets have taken a hit after China announced the release of a cheaper artificial intelligence model, which could challenge the supremacy of U.S. technology.
China’s DeepSeek said that it has developed AI models nearly on par with American rivals, despite using inferior chips and less data. Investors are now questioning the lofty valuations of AI-related stocks and Silicon Valley’s business model, which relies on significant capital for research and development. In another blow to U.S. AI stocks, DeepSeek’s AI Assistant surpassed ChatGPT to become the highest-rated free application on the U.S. Apple App Store.
With equity markets so deep in the red, some analysts have said that it’s not surprising gold has also been dragged lower.
“When news like this breaks, especially outside of market hours, the first reaction is to sell everything and then reassess. That looks to be happening in precious metals, as both gold and silver have rallied off their overnight lows. At the same time, there hasn’t been a corresponding jump in U.S. stock index futures. So, yet again, there’s another piece of evidence adding to the ongoing resilience of gold,” said David Morrison, Senior Market Analyst at Trade Nation.
Commodity analysts at TD Securities are also not overly worried about gold's decline.
“Don't sweat the algo selling activity in gold. The yellow metal is being swept into this round of deleveraging and CTA liquidations, but our simulations of future prices suggest that CTAs will be back on the bid in gold in any scenario for prices over the coming sessions, suggesting this round of selling activity will remain short-lived,” the analysts said in a note.
Phillip Streible, Chief Market Strategist at Blue Line Futures, said he sees any near-term weakness in gold as a buying opportunity. He added that investors should not ignore the precious metal’s safe-haven appeal.
“Gold is an attractive asset for investors to park their money in as they reprice valuations in the tech sector,” he said.
Streible also noted that gold continues to benefit as a global currency and hedge against geopolitical uncertainty.
Streible said President Donald Trump used his tariff threats as a political weapon rather than an economic tool. Over the weekend, Trump threatened Colombia with tariffs after it refused to allow two U.S. flights carrying deported migrants to land because they were military, not civilian, transport planes.
Colombia’s President Gustavo Petro eventually gave in to Trump and allowed the planes to land on Sunday.
“Tariffs were supposed to be an economic tool to support the U.S. economy. After this, investors will have to reevaluate how this new administration will use them. We will see heightened geopolitical uncertainty because of this, and gold should benefit,” said Streible.
Looking ahead, many analysts have said they are bullish on gold this year as an important diversification tool to hedge against equity market valuations near record levels.
