Precious metals markets saw their largest decline in years on Tuesday, with gold recording its biggest drop in more than 12 years and silver suffering its biggest loss since February 2021. This was amid a widespread sell-off following successive record highs over the past few weeks.
sharp decline
Spot gold prices fell 6.3 percent to $4,082.03 per ounce.
Spot silver prices fell 8.7 percent to $47.89 per ounce.
What happened?
According to Bloomberg News, several factors have combined to pressure precious metals prices, most notably:
Improved trade talks between China and the United States reduced demand for safe havens.
A rise in the strength of the US dollar, making gold and silver more expensive for global buyers.
Technical indicators are saturated after a strong uptrend, raising concerns of a price correction.
The buying season has ended in India, one of the world's largest gold markets.
The absence of speculative data due to the US government shutdown has increased investor uncertainty.
Declining demand for safe havens
Demand for gold and silver as safe havens has declined as US President Donald Trump and his Chinese counterpart, Xi Jinping, approach next week's meeting to resolve trade disputes. Relative strength indicators also show that gold prices have significantly entered overbought territory.
What do the experts say?
In recent sessions, traders have started to worry about a price correction, Ole Hansen, a commodity strategist at Saxo Bank, told Bloomberg News. Corrections always reveal the true strength of the market, and this time will be no different, as underlying demand is likely to remain supportive and limit any significant decline.
Lack of data increases risks
The US government shutdown deprived traders of the Commodity Futures Trading Commission's report, which reveals hedge fund positions in gold and silver futures. This absence could lead speculators to build unbalanced positions, increasing the potential for volatility.
Unprecedented fluctuations
Markets witnessed a sharp increase in precious metals price volatility, with options contracts linked to the largest gold-backed exchange-traded fund exceeding two million contracts on two consecutive days last week, a new record.
Silver under pressure after historic rise
Silver retreated after rising nearly 80 percent since the beginning of the year, supported by the same factors that supported gold, in addition to the supply shortage crisis in the London market. This shortage prompted traders to ship the metal to the British capital to relieve pressure, while Shanghai warehouses recorded their largest daily withdrawal since February, and inventories in New York also declined.
Although index funds have not yet reached their all-time highs, Bloomberg experts warn that the momentum is short-lived, and that any strong US economic data could push gold further down.
