Gold and Silver Continue Correction, Rally Stalls
Gold and silver retreated from record highs. Gold fell 2.9% to $4,004.26/oz the previous day after dropping 6.3% intraday, its biggest drop in over 12 years. Silver also fell more than 2% to around $47.6/oz after a 7.1% drop in the previous session. In Asia, stocks traded mixed after Wall Street ran out of steam, while US Treasury yields rose and the dollar index remained flat.
Profit-taking was the primary driver. Analysts believe that year-round price action has led many traders to maintain safe havens at "never-before-seen" levels. Excessive technicals have caused the rapid decline to "spread" into the derivatives market, deepening the precious metals' correction in a short period.
On the fundamental side, the past few months have included central bank buying, falling yields, and concerns about large-economy fiscal deficits. Now, the market is returning to reality: expectations of monetary easing remain, but the short-term outlook for the stock market is likely to consolidate/pull back. Global stock exposure—according to some banks—remains high, so risk-on fund flows remain strong and suppress safe-haven demand.
The US government shutdown widened the data vacuum. Commodity traders were aware of the CFTC's weekly report on hedge fund positions in gold and silver, increasing their positions. Some analysts suspect the accumulation of long positions will trigger a wave of selling when technical/news triggers emerge. Meanwhile, US Treasury yields strengthened (the 30-year yield is the lowest since early April), adding to the relative pressure on gold.
Looking ahead, the weakness could ease if the dollar and yields decline, or if buying the dip emerges from investors who missed out on the rally. However, the combination of more positive trade talks, a relatively strong dollar, the end of the seasonal shopping season in India, and the lack of official positioning data has the potential to create a slight price rebound in the short term.
Key Points (5):
- Gold -2.9% to $4,004, silver -2% to $47.6; a continuation of the correction from the record.
- Profit-taking and technical overbought conditions triggered the drastic decline.
- The previous rally was supported by central banks, falling yields, and fiscal themes—now the market is consolidating.
- The US shutdown erases the CFTC report, confounding speculative positions.
- Short term: rebound depends on USD & yields; the risk of a shallow rebound remains high. (asd)
Source: Newsmaker.id
