Gold prices have continued to face negative pressure since the beginning of the week, despite some recent gains. While some major currencies have retreated, the precious metal remains the focus of market attention. Despite these temporary gains, the overall trend remains bearish. This negative sentiment reflects the market’s reaction to growing economic concerns, fueled by trade tensions, as well as developments in US monetary policy.
Gold Rises, Then Falls: A Temporary Record
Gold prices initially experienced a significant jump, reaching an all-time high of $3,168 per ounce, following US President Donald Trump’s surprise announcement of new tariffs. This rise was a direct result of rising trade tensions. However, prices quickly declined after this rise, with gold falling more than $100 from its high, which analyst Carsten Fritsch of Commerzbank described as unsurprising. The initial pressure on gold was due to liquidation by traders anticipating further declines in financial markets. This type of selling is a normal reaction during times of reduced risk. Gold typically recovers losses quickly, and this may happen now due to expectations of lower interest rates.
Market Expectations: Interest Rate Cuts and Gold
Expectations are currently leaning toward a 100 basis point cut by the Federal Reserve by the end of the year, which should be positive for gold. Given these expectations, market momentum for gold has increased as investors anticipate that lower interest rates will make the precious metal more attractive. Gold prices typically correlate inversely with rising interest rates, with gold tending to rise when rates are low.
Tax exemption for gold and increased inventories
One factor that has helped support the price of gold is the exemption of the precious metal from tariffs imposed on certain goods. There is no longer a need to impose tariffs on gold, which means demand for it may decline as the need to ship it to the United States decreases. In this context, data indicates that gold inventories on the Comex have increased significantly this year.
Yesterday, the markets saw an additional increase of 18 tons, but the flow of gold is expected to stop or at least decline significantly in the near future. If this trend continues, we may see a decline in gold inventories, affecting future expectations.
Silver Under Pressure and Other Metals Decline
Silver is one of the metals that has been severely affected recently. Its price has fallen sharply, by 6% at times, reaching around $31.20 per ounce. This decline is attributed to several factors, including the negative impact of trade tensions and the industrial demand crisis. Although silver is a precious metal with the potential to hedge against inflation, its loss of all of its gains since the beginning of March may reflect weak industrial demand.
Gold-to-Silver Ratio Rise
Due to silver’s decline, the gold-to-silver ratio rose to 99, its highest level since July 2020. This ratio reflects the inverse relationship between the price of gold and silver, with gold rising as silver declines. This discrepancy reflects concerns that tariffs will slow global economic growth, which will negatively impact industrial demand for silver.
In contrast, other metals such as platinum and palladium have not experienced the same sharp decline as silver. Despite their price declines, these metals remain attractive to investment. This is due to the greater industrial demand for these metals compared to silver.
Plasma and Palladium: Less Volatility
Despite the decline in platinum and palladium prices, these metals have not experienced the significant declines that silver has. Industrial demand for platinum and palladium appears to remain relatively strong, albeit less sharply than in the previous period. Analysts note that these metals enjoy a greater advantage in the industrial market compared to silver, contributing to their relative price stability. However, the overall economic situation may continue to impact their performance in the coming period, especially in light of expectations regarding tariffs and their impact on the global economy.
Reasons for the Decline in Demand for Precious Metals
The decline in demand for precious metals is due to several factors, most notably the recent trade turmoil in the markets. US tariffs, for example, may contribute to increased costs of raw materials used in manufacturing, leading to a decline in industrial demand for silver and platinum. In addition, there is still concern about the impact of these tariffs on overall global economic growth, contributing to increased volatility in metals markets.
Gold and Precious Metals Outlook
Gold and precious metals markets remain in a state of anticipation due to several economic and political factors. Investors should monitor the impact of tariffs on the global economy, as well as inflation and interest rate data, which may determine the future direction of markets. The precious metal will likely continue to trade within a narrow range, reacting to economic and trade events. Meanwhile, other metals such as silver and platinum may remain under pressure amid the current global economic conditions.
Overall, expectations indicate that gold will remain one of the most important metals sought by investors as a safe haven during volatile economic conditions, while silver and platinum may experience greater volatility amid the impact of tariffs and global monetary policies.
