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Gold and silver bulls fight back, experts warn: A bigger storm is yet to come
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Hello everyone, today XM Forex will bring you "[XM Foreign Exchange Market Analysis]: Gold and silver bulls counterattack, experts warn: A bigger storm is yet to www.xmh100.come." Hope this helps you! The original content is as follows:
During the Asia-European session on Thursday (October 23), spot gold rose slightly, regaining its position above the US$4,100 per ounce mark, with an increase of about 0.51%. It is now trading around US$4,120. The gold price once fell to around US$4,066 per ounce during the day. Spot silver also rose slightly, standing above $49 an ounce, an increase of about 1.57%, and is now trading around $49.20.
Gold and silver prices experienced a sharp decline on Tuesday, with the day's declines hitting their worst levels in five and four years respectively. But despite the short-term volatility, the conditions that led to overheating remain in place, according to one market analyst.
The ongoing U.S. government shutdown and geopolitical tensions have provided support for gold and silver prices, with the market viewing these precious metals as safe-haven assets in times of uncertainty. In addition, market expectations for further interest rate cuts by the Federal Reserve are also supporting precious metal prices.
After the collapse of gold and silver, overbought pressure has eased, but the allocation ratio is still insufficient
According to Ole Hansen, head of www.xmh100.commodity strategy at Saxo Bank, gold and silver prices are undergoing a belated adjustment. Silver's larger decline highlights the liquidity gap between the two metals, but the proportion of the two in the investment portfolio is still low, and the structural factors driving the rise are still intact.
Hansen said on Thursday: "Although unusually strong demand before Diwali (India) has supported gold prices, the risk of a correction in gold and silver has indeed continued to rise in recent days. However, the www.xmh100.combination of a severely overbought technical rally, a return to risk appetite in the stock market, a stronger U.S. dollar, and especially the weakening of physical demand in Asia after the start of Diwali has made traders increasingly cautious and more inclined to lock in profits rather than chase higher prices."
He pointed out that although the specific triggers of Tuesday's violent sell-off are not yet clear, the failure of gold prices to rise to $4,380 three times "may prompt the mentality of precious metals traders to shift from greed to fear."
Hansen analyzed: "Then a classic multi-kill-multi situation emerged: leveraged traders who focused on technical aspects closed their positions collectively, new buyers panicked and sold after discovering that their positions fell below the cost price, and the narrow exits were instantly squeezed. The latest market price once again confirmed the significant difference in the liquidity of gold and silver—— Silver's liquidity is only about one-ninth that of gold. This difference will amplify the rise and fall simultaneously: a surge in buying will quickly exhaust the limited supply, and any profit-taking will trigger a disproportionate move."
He noted that both gold and silver rebounded after a rare slump in several years on Wednesday. Hansen said: "This sharp pullback shows that after nine consecutive weeks of surge (gold rose 31%, silver rose 45%), the bullish sentiment in the market has caused prices to need a technical repair. As mentioned earlier, in addition to the strengthening US dollar, the main catalyst is post-Diwali demand in India Weaker. At the same time, silver rebounded from the support level of $47.80, and gold found buying support above $4,000."
He added that the precious metals market is in urgent need of a correction to avoid the formation of a bubble that will burst more violently in the future.
Hansen pointed out: "The focus of the silver market has now turned to the United States' upcoming Section 232 investigation into imports of key minerals including silver, platinum and palladium - a ruling that may reshape the short-term supply chain and price pattern on both sides of the Atlantic. A zero tariff ruling will promote This will allow more U.S. silver inventories to flow to Europe, thereby easing supply constraints in the London market, narrowing the London-COMEX premium that previously reached extreme levels during the epidemic, and returning one-month lease rates to normal levels. "
Of course, additional tariffs will have the opposite effect. He analyzed: "Silver already in the United States will fall into a semi-stagnant state, exacerbating scarcity in the London market and pushing www.xmh100.comEX premiums higher. Under this scenario, silver may be driven by a new round of squeeze momentum (rather than real demand growth) to quickly retest - or even break through recent highs."
Hansen said that Saxo Bank still maintains its bullish expectations for gold and silver prices until 2026.
He predicted: "After this much-needed correction/consolidation, traders may wait and see temporarily before judging that the core drivers of this year's historic rally have not disappeared. These factors will continue to provide support for precious metals - after all, the current market has eliminated overbought pressure, but portfolio allocation is still insufficient. In the short term, if there is a risk of trade friction, If the meeting www.xmh100.comes to pass, it will become a key risk event that determines the current correction cycle. "
Silver has suffered a violent sell-off but a supply shortage indicates that prices will go higher
Robert Minter, director of ETF investment strategy at Abrdn, said in an interview with KitcoNews that although Tuesday's sell-off was fierce, it helped ease it.Overbought conditions in gold and silver.
If you liked gold and silver last week when prices were unsustainable, you have to like it now because it's in a healthier market, Minter said. At the same time, Minter said precious metals investors should get used to higher volatility — especially silver, which he expects to continue to experience significant supply shortages.
Minter pointed out that the silver market has been experiencing severe supply shortages over the past four years due to growing industrial demand, but it will take some time to clear above-ground inventories. The market has just reached a point where there is not enough physical metal to meet immediate demand.
Minter said there has been a severe supply shortage of silver for years, but no one seemed to care. But we can see that prices are just starting to consolidate at the beginning of the year.
We should not be surprised by a rapid re-rating of silver due to market conditions, Minter said. We also shouldn't be surprised that some investors are taking profits at these levels. The market has been under tremendous pressure this year due to the global trade war and the threat of U.S. tariffs, with silver prices seeing wild swings.
At the beginning of this year, large amounts of silver poured into the United States, with market participants and bullion traders hoarding the precious metal to avoid potential tariffs.
The inventories are causing damage to London's physical market, while unprecedented investment demand in recent weeks has www.xmh100.completely depleted available stocks - pushing rental rates to record highs and pushing up the premium between spot and futures prices. Minter said he doesn't expect market volatility to subside anytime soon. Currently, there isn't enough metal to satisfy all the different markets, he said. But he didn't know what could change that. He doesn't think there will be enough recycled material to meet demand.
Minter noted that silver mine supply has fallen 8.8% since 2016, despite increased demand. The question, he said, is how are we going to achieve a significant increase in silver supply? This requires a higher price, but it goes well beyond that. He doesn't think any silver miner wants to increase production, but they are constrained. It takes at least 10 years to bring a new mine into production. All in all, Minter said, the silver market is unlikely to be fundamentally resolved in the short term.
Gold and silver prices are experiencing a belated correction, with silver's larger decline highlighting the liquidity gap between the two - but Ole Hansen, head of www.xmh100.commodity strategy at Saxo Bank, pointed out that the allocation ratio of the two assets in the portfolio is still low, and the structural drivers driving the rally remain solid.
The above content is all about "[XM Foreign Exchange Market Analysis]: Bulls of gold and silver counterattack, experts warn: A bigger storm is yet to www.xmh100.come". It is carefully www.xmh100.compiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your trading! Thanks for the support!
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