Editor’s Note
As markets in China prepare to close for the Lunar New Year, precious metals have seen a decline. Interestingly, the typical safe-haven alternative, the US dollar, has not capitalized on this shift. This brief highlights the nuanced movements in these key assets ahead of the holiday period.
Precious metal prices fell on Thursday ahead of the closure of markets in China for the Lunar New Year holidays, but the competing safe-haven asset, the US dollar, failed to gain significant ground.
Ahead of the celebration, seasonal demand from Asian buyers is “historically very strong,” which supports prices, John Plassard of Cité Gestion Private Bank explained to AFP.
The Shanghai Gold Exchange and futures markets will be closed from Friday evening and reopen on February 24.
After losing more than 4%, gold was down 2.64% to $4,950.32 per ounce (31.1g) around 20:00 GMT.
Experts also highlighted the role of technical movements, with some investors choosing to trigger automatic sell orders designed to limit their losses (“stop-loss”). The $5,000 per ounce threshold for gold is a particular target.
Silver experienced similar volatility and was down more than 9% to $76.55 per ounce around 20:00 GMT.
For its part, “the dollar is failing to take advantage of the US jobs report and the weakness in precious metals,” noted Kevin Ford of Convera.
The US labor market performed better than expected in January, leading to a moderate rise in the greenback on Wednesday.
Since then, however, the currency has stagnated, gaining only 0.01% against the euro, to $1.1871.
For Kevin Ford, a deeper analysis of the official data continues to support the hypothesis of “fragility” in the US job market.
The market is therefore divided on the possibility of welcoming another interest rate cut from the US Federal Reserve (Fed) as early as June, or not, according to the CME FedWatch monitoring tool.
Currency traders are now awaiting the release of the Consumer Price Index (CPI) on Friday, which will allow them to refine their expectations.