After breaking through the highs, gold, silver and copper fell collectively, whether they can regain their gains

The official account of Beijing Business Daily

2024-06-05 19:54Published on the official account of Beijing Business Daily in Beijing

Beijing Business Daily (Reporter Yue Pinyu Dong Hanxuan) After the prices of precious metals such as gold, silver, and copper hit a record high, they ushered in a collective pullback. Among them, spot gold prices have fallen for two consecutive weeks.

In late May, spot gold broke through record highs, hitting as high as $2,450. Central banks have emerged as the strongest buyers, with the latest official reserve asset data showing that the People's Bank of China increased its gold reserves by 60,000 ounces in April, achieving an "18th consecutive increase".

However, over the next two weeks, gold prices fluctuated to the downside. On June 4, spot gold closed at $2328.6 per ounce, down nearly 1% during the day. As of June 5, the spot gold price fluctuated around $2,330, hitting as low as $2,324.8 an ounce.

Silver and copper, which are both industrial properties, are even more "difficult". Among them, the price of silver retreated from a high near $33 to below $30. As of 15:20 on June 5, the London silver price was at $29.478. As one of the best-performing precious metals year-to-date, copper is favored by the market, and the price of Comex copper in the United States rose to a record high of $5.2 per pound on May 20, the highest increase this year reached 36%; But in the past two weeks, copper prices have fallen more than 10% and are now around $4.55.

In the opinion of analysts, the Fed's expectation of interest rate cuts, the slow decline in inflation, and the weakening of global economic data constitute the reasons for the downward trend in the precious metals market. Zhou Maohua, a macro researcher at the financial market department of Everbright Bank, explained that on the one hand, the recent economic data in Europe and the United States showed signs of slowing demand, causing the market to worry about the prospect of metal demand; On the other hand, Europe and the United States are facing stubborn inflation, restrictive interest rates have been maintained for a longer time, and the prices of these metals are at historically high levels, and investors' willingness to chase further increases has weakened.

Some analysts believe that the recent signal that the Federal Reserve may postpone interest rate cuts has become one of the main reasons for the weakening of gold. The Fed's interest rate cut expectations have converged, and precious metals should be under pressure to the downside, but in late May, precious metals not only did not fall, but rose sharply, and the divergence between prices and fundamentals caused the market to accumulate certain risks.

The improvement of inflation, economic data and other related indicators are also the influencing factors for precious metals to stop falling and stabilize. Markets are focused on two important milestones this week: the US Labor Department's May employment report on Friday, which will be the key data of the week. The key non-farm payrolls data is expected to add 178,000, compared with 175,000 in the April report. At the ECB meeting on Thursday, the market expected the ECB to "go ahead" and cut its main interest rate by 25 basis points.

Can gold, silver and copper regain their rally? Looking ahead, Zhou Maohua said he remains cautiously optimistic about the prospects for these metals. Their commodity attributes are constrained by the slowing global demand outlook and the sluggish performance of the manufacturing industry; The stubborn inflation faced by Europe and the United States will also pose headwinds for the financial properties of these metals.

In Zhou Maohua's view, at present, gold, silver, and copper have reflected the geopolitical conflict and the recovery of global demand, and they are cautious about the follow-up trend as a whole, and tend to be structural. Therefore, ordinary investors need to be protected against potential volatility risks.

Ming Ming, chief economist of CITIC Securities, also believes that in the short term, there may be a risk of further adjustment in gold, silver and copper prices. On the one hand, this is because commodities such as gold and copper have factored in too many Fed rate cut expectations in the early stage, and the interest rate cut expectations included in such assets may be further adjusted in the future; On the other hand, the recovery of copper prices is obviously ahead of the recovery of the global manufacturing boom, and this overly optimistic expectation may also be corrected.

It is undeniable that gold's safe-haven function does not diminish as the price falls. Based on this, some analysts are optimistic about the upward trend of gold. The "gold buying fever" of many central banks around the world continues, and gold, as an irreplaceable safe-haven variety, has become a tool for central banks to hedge systemic risks, making the potential upside of gold still large in the long run.

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