Spot silver dropped as much as 8.7% to $47.89 an ounce, while spot gold dropped as much as 6.3% to $4,082.03 an ounce.
Following a weeks-long run that propelled precious metals to consecutive record highs, a wide market selloff on Tuesday caused gold to plummet the most in a twelve years and silver to plummet the most since February 2021.
Spot silver dropped as much as 8.7% to $47.89 an ounce, while spot gold dropped as much as 6.3% to $4,082.03 an ounce.
Positive trade discussions between the US and China, a stronger dollar, overstretched technicals, and anxiety over investor positioning owing to the government shutdown and the end of a seasonal buying frenzy in India were among of the reasons that pulled down the precious metal.
With US President Donald Trump and Chinese President Xi Jinping scheduled to meet next week to resolve their trade disagreements, demand for precious metals has slightly cooled. The relative strength indicator for gold shows that prices have moved far into the overbought range. Additionally, most purchasers now find precious metals more costly due to the increasing US currency.
Ole Hansen, commodities strategist at Saxo Bank AS, said that traders have been watching their backs more and more in the last few trading sessions due to worries of a correction and consolidation. “A market’s actual strength is usually exposed during declines, and this time should be no exception, with an underlying bid probably limiting any drop.”
Commodity traders have also lost one of their most important resources due to the current government shutdown in the United States: the Commodity Futures Trading Commission’s weekly report that shows the positions of hedge funds and other money managers in US gold and silver futures. In any case, speculators could be more inclined to create unusually big bets in the absence of the facts.
“A possible accumulation of speculative long exposure in both metals makes them more susceptible to correction, and the lack of positioning data comes at a crucial moment,” Hansen said.
Precious metal volatility has increased recently, and traders are trying to either benefit from the decline or protect themselves against future price declines in other areas of their portfolios. The world’s biggest gold-backed exchange-traded fund had almost 2 million options contracts exchanged on Thursday and Friday of last week, breaking a previous record.
The opinions of Bloomberg strategists…
As of right now, the absolute gold holdings of ETFs have not risen to the previous highs, and rallies have often lasted much longer. However, history demonstrates that enthusiasm ultimately wanes and that purchasing often turns into selling. There may be a bigger gold retreat soon if delayed data ultimately shows a stronger US economy than expected.
—Macro Strategist Tatiana Darie. To see the whole analysis, follow this link.
A record squeeze in the London market and some of the same global variables that supported gold caused silver to plummet after rising over 80% this year. In order to relieve tightness, traders are shipping metal to the UK capital since benchmark prices are trading higher than New York futures. New York stocks have also decreased, and Tuesday witnessed the largest one-day outflow of silver since February from vaults connected to the Shanghai Futures Exchange.
As of 11:14 a.m. New York time, gold was down 4.9% at $4,142.15 an ounce. The price of silver dropped 6.7% to $48.92 an ounce.