On Thursday, the precious metals market faced significant selling pressure, with spot gold prices falling below the $4,000 mark and silver also breaching the $60 defense line, dragging market sentiment into a slump. Analysts point out that the continuous strengthening of the US dollar and the Federal Reserve's maintained hawkish stance are the core factors currently suppressing gold prices. However, as oil prices retreat and expectations for interest rate hikes cool, some bearish factors are gradually easing, and signs of improvement in gold fundamentals have emerged. Nevertheless, before capital outflows from gold ETFs stabilize and the upward momentum of the US dollar weakens, the trend of the precious metals market will remain primarily driven by capital flows and technical factors.
Currently, both gold and silver have entered a defensive stance, with some investors choosing to reduce positions or exit the market. Data shows that gold has cumulatively dropped 8.4% this year, but still maintains an 18.5% gain over the past 12 months; silver has seen an even sharper correction, down 19% cumulatively this year but up 56% over the past year. The recent price weakness mainly stems from the continuous strengthening of the US dollar and the market's repricing of the Federal Reserve's monetary policy path. The US Dollar Index continued to rise this week, hitting a 13-month high. After the Fed released hawkish signals, the market bet on the possibility of further tightening monetary policy later this year, which pushed up the dollar exchange rate. For precious metals that do not generate interest income, rising interest rates mean increased holding costs. Against the backdrop of fragile investor confidence, the stronger dollar has exacerbated selling pressure.
From a technical perspective, gold breaking below the $4,000 integer level indicates further market weakness. International gold prices have corrected approximately 26% cumulatively from the historical high above $5,600 at the beginning of this year. This technical breakdown may prompt more long positions to close and exit. Although speculative capital positions have declined significantly, the strengthening dollar and continuous capital outflows from gold ETFs remain the two major factors suppressing prices. However, some macroeconomic factors that drove gold's previous decline are improving. The significant retreat in international oil prices has alleviated inflation concerns and reduced the necessity for the Fed to tighten policy further. This change has been reflected in the fed funds futures market, where investor expectations for further rate hikes have cooled, and US long-term Treasury yields have also recently declined.
In addition, several Chinese commercial banks have recently tightened personal precious metals trading businesses, including suspending some agency trading services, freezing new account openings, and significantly increasing margin requirements to restrict high-leverage speculative behavior by individual investors. Although the gold price trend remains weak, the fundamental environment facing gold is no longer as severe as before. Whether gold can re-attract capital inflows in the future hinges critically on gold ETF capital outflows tending to stabilize and the upward momentum of the US dollar beginning to weaken. Before these two conditions appear, gold and silver prices will still be more affected by position adjustments and technical trading rather than fundamental drivers. Once ETF selling pressure eases and the dollar's rise slows, capital looking to buy the dip is expected to re-enter, and precious metals market sentiment may improve accordingly.
