Editor’s Note
Gold prices have retreated below the psychologically significant $5,000 per ounce threshold, marking a notable decline during the Lunar New Year period and setting the stage for a pivotal phase in the market’s direction.
During the Lunar New Year holiday, global precious metal prices continued to decline. With the short-term rebound in gold prices falling back below $5,000 per ounce, the battle over future trends has officially begun.
According to statistics from the Investing website, based on the closing price on the 17th (local time), the international gold spot price was $4,877.4 per ounce. This represents a decline of approximately 2.8% over the past week. After recovering to the $5,100 level earlier in the week, gold prices, which had raised hopes for a rebound, failed to hold the $5,000 line and returned to a weak position.
The decline in silver prices was even more pronounced. The silver spot price plummeted nearly 10% on the same day to $73.48 per ounce. Silver, which has a higher proportion of industrial demand than gold, is more sensitive to economic conditions and dollar trends, leading to increased volatility.
Recently, as the US Consumer Price Index (CPI) came in lower than expected, expectations for interest rate cuts by the US Federal Reserve (Fed) increased, leading to a temporary recovery in gold prices. Lower borrowing costs are favorable for precious metals, which offer no interest income. However, analysis suggests that the current firm trend of the US Dollar Index (DXY) around the 97 level is constraining the rise in gold prices. Gold typically has a negative correlation with the US dollar.
The reduction in liquidity due to the Lunar New Year holiday, which closed not only Korean markets but also major Asian financial markets in China, Hong Kong, and Singapore, and the weekend closure of US markets, also added downward pressure. Sukeden Financial, a global precious and non-ferrous metals trading specialist, recently noted, “Overall liquidity in the metal market has decreased,” and “If there is no significant re-inflow of speculative demand, prices are likely to move within a limited range in the short term.”
The market believes that whether the price can recover to the $5,000 line will be a key watershed moment determining the short-term direction.
The weakness in precious metal prices has also burdened related stocks. Since the 11th of this month, Newmont has declined by about 2% over the past week, showing weakness. Goldcorp (6.6%) and Core Mining (5.5%) have shown sharp declines.
As raw material price fluctuations directly affect performance, mining stocks have a leveraged effect on precious metal price movements.
On the 30th of last month, the designation of former Fed Governor Kevin Warsh, known as a “hawk,” as a candidate for the next Fed Chair lowered expectations for monetary easing and led to a dollar rebound. Consequently, a large number of profit-taking sell orders hit the precious metals market. Coupled with a margin call shock, gold and silver prices recorded their largest decline since 1980.
It is predicted that US employment indicators and major national price indicators to be released this week are highly likely to influence short-term volatility.