Gold and silver prices edged higher after a concentrated sell-off last Friday, but market sentiment showed little sign of recovery. October just ended proved to be one of the worst months for the two precious metals since 2008. With prices breaking through some key support levels, investors are increasingly split on the path ahead: some worry that high interest rates, a strong dollar and energy shocks will continue to weigh on metals prices, while others argue that the recent decline is largely a technical drawdown caused by liquidity squeezes, opening a window for long-term allocation.

Some market participants note that silver is down about 60% from its all-time high of $121.64 an ounce, while gold has slipped to a one-year low. Mainstream financial coverage is amplifying a crash narrative, and retail investors who bought at elevated levels are exiting under the pressure of losses. But for long-term capital familiar with commodities, capital flows and cross-asset margin shocks, the current situation looks more like a liquidity vacuum than a fundamental crisis.

Rate expectations remain one of the core factors weighing on gold and silver. Although the Federal Reserve left rates unchanged last week, traders are still betting that the Fed may continue hiking in December. The opportunity cost of non-yielding assets rises as rate expectations increase, putting valuation pressure on gold and silver. At the same time, equities have also been volatile in a high-rate environment: the S&P 500 fell 2% heading into last Friday, marking one of its largest weekly declines since early June. Some institutions believe that when overvalued technology stocks and the broader equity market begin to loosen, selling pressure can spread from a single market into a cross-market cash crunch. More liquid assets are often sold first, leaving gold and silver exposed.

Geopolitical and energy supply risks are also boosting dollar demand. Ongoing conflict in the Middle East and tight global energy supplies have pushed up oil prices, forcing companies in importing countries to buy dollars in foreign exchange markets to pay for energy purchases. A stronger dollar in turn weighs on dollar-denominated precious metals. Rising energy prices also intensify inflation pressure, which could keep monetary policy tighter for longer and push up bond yields. Higher yields not only lower the present value of corporate earnings but also raise financing costs for the real economy, weighing on risk assets and precious metals alike.

Some investors are comparing the current volatility with the liquidity shocks of 2008 and 2020. After Lehman Brothers collapsed in 2008, gold fell about 29% from its high and silver dropped more than 50%. In March 2020, gold fell about 10% over a few days and silver declined roughly 35%. Once forced selling ended, both assets staged strong rebounds. After 2008, gold rose about 170% by August 2011, while silver briefly approached $50 an ounce. After March 2020, gold gained about 39% by August that year and set a new record high, while silver rose about 150%.

Short-term money, however, has not fully turned optimistic. Some views hold that gold and silver may still test lower levels before forming a sustainable bottom. A number of investors are preparing to buy mining stocks on dips if weakness persists, with target prices 20% to 30% below current levels. Asian physical demand is seen as a potential source of support. During last Friday’s sell-off, silver prices in the Shanghai market diverged from Western markets. Although China’s tax on silver dampens the headline premium, in the long run demand from China and other Asian markets could still shape the price trajectory.

On the longer-term outlook, some fund managers argue that massive sovereign debt burdens make it difficult to sustain a high-rate environment for long. If rates remain elevated, debt-service pressure on governments, businesses and consumers will rise, potentially straining the banking system and the real economy. Based on that view, the market is betting that central banks will eventually pivot toward easing, the dollar’s strength will recede, and capital will flow back into hard assets such as gold and silver. The recent rebound in precious metals has been limited, and traders continue to watch the dollar, U.S. Treasury yields, energy prices and Asian physical demand.