Gold and Silver Prices Rebound After Significant One-Day Decline
In a remarkable turnaround in the London markets on Tuesday, gold and silver prices recovered from their substantial drops the previous day. This rally comes after both metals hit near three-week lows, marking the most pronounced single-day decline for the ‘safe haven’ assets since May 2022.
Silver prices surged above $27 per Troy ounce, a figure last seen at its 33-month peak in mid-March. Concurrently, gold prices reclaimed the $2300 mark after a sharp 5.7% fall from its record high of over $2400 on April 12.
Nicky Shiels, a strategist at Swiss bullion refining and finance group MKS Pamp, shared insights with CNBC, emphasizing the need for perspective despite the steep one-day retraction. “Since the Hamas attacks on October 7th, gold has consistently risen by $600…as expectations for Federal Reserve rate cuts decreased significantly,” Shiels noted.
The strategist highlighted that geopolitical tensions had driven gold into overbought territory, but the dynamics are shifting. “Real interest rates are now around 2%… signaling a new phase in how gold interacts with borrowing costs, moving past its traditional inverse relationship with real interest rates once inflation is considered,” Shiels explained.
On Tuesday, the real rate of interest as indicated by 10-year US Treasury inflation-protected securities (TIPS) approached a five-month high of 2.24% per annum. As TIPS rates increased, spot gold prices momentarily dipped to $2291.78 before climbing in the London market, surpassing $2300 once more.
Similarly, silver prices experienced a significant drop below $26.70, over $3 down from the three-year high on April 12, before recovering in the London midday auction, a 3.1% decrease from Monday’s benchmark.
Over the past year, silver has endured 10 significant daily declines of 3% or more, with the most recent 4.9% fall in dollar terms marking the steepest weekly loss since the New Year.
Amidst fluctuating market conditions, silver demand in India shows positive signs, primarily driven by increased fabrication needs. “Trade data suggests that restocking activities are underway, which is generally bullish for short-term demand,” according to the latest market report by analysts SFA (Oxford) for the German refining group Heraeus.
Despite lower trading prices for imported silver in India, the global demand for gold bullion and jewelry shows varied support, with continuous strong demand in China, even at record-high prices this month, Heraeus reports.
In other market news, cryptocurrency Bitcoin stabilized around $66,000 after a 1.1% drop, amidst ongoing discussions about transaction fees following the recent halving event. Meanwhile, global stock markets experienced a second day of rallies, although Chinese equities continued their downward trend.
Looking ahead, Thursday will see the release of US economic growth data for the first quarter, with key personal consumption expenditures (PCE) inflation data expected on Friday. Stay updated with our Gold Market Reports on YouTube for more insights and analyses.
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