Gold and silver prices continued their sharp decline from record highs, while Asian stocks fell after the Wall Street rally showed signs of fatigue.
Gold prices dropped by as much as 2.9% before trimming losses, posting their biggest intraday decline in more than a decade on Tuesday. Silver prices also fell, after dropping 7.1% in the previous trading session.
The sudden drop in precious metal prices highlights a wave of profit-taking. Previously, driven by central bank-led purchases and concerns over the fiscal woes of developed countries, precious metal prices have risen sharply this year. Previously, technical indicators suggested that the recent strong rally might have been overextended.
Barclays said that despite the recent risk reduction due to concerns over trade and credit, the equity exposure of global macro hedge funds and long-only strategies remains at its highest level in more than a year.
Despite the economic data vacuum caused by the US government shutdown, the stock market’s decline was only temporary as investors saw it as an opportunity to increase portfolio risk. The government shutdown also deprived commodity traders of one of their most valuable tools: the weekly reports from the US Commodity Futures Trading Commission (CFTC), which show the positions of hedge funds and other fund managers in US gold and silver futures.
Analysts Brian Martin and Daniel Hynes of ANZ Banking Group Ltd. said in a report: “We suspect that this position has accumulated to a relatively high level and eventually triggered the sell-off. Despite the pullback, we still believe that the long-term drivers remain in place and provide support for prices.”
A variety of factors have pulled down the prices of precious metals, including the positive trade negotiations between China and the United States, the strengthening of the US dollar, overly tense technical aspects, and the uncertainty in investor positioning caused by the US government shutdown and the end of the seasonal buying spree in India.
Institutional analyst Fawad Razaqzada said that the rise in gold prices in recent months has been extraordinary, driven by falling yields, continued central bank purchases and expectations of further easing of monetary policy. It is too early to say that the overall bull trend has ended, and a correction is normal.
Technical analysis:
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Gold: Yesterday, our plugin intended to capture the blue momentum break but it didn’t occur; the yellow sweep liquidity emerged, but the price failed to return above 4321. Over the past two days, the gold price has fluctuated by approximately 380 dollars. In the early morning, a sharp drop occurred, briefly breaking below the 4000 mark. Currently, the price has rebounded above 4100 and is consolidating, challenging the key resistance zone of 4130/4150. If this zone is reclaimed, it might trigger a further rebound correction. For detailed positions, please consult the plugin.
(Gold 15-minute chart)
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Nasdaq: Our position set up near 25,000 yesterday did not trigger. Today, we can continue to maintain the green + yellow strategy combination around this level. For detailed positions, please consult the plugin.
(NASDAQ 15-minute chart)
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Crude oil: The operation in the blue area we alerted yesterday through the plugin could achieve a 2:1 profit-to-loss ratio. After the liquidity sweep, the price further rose above 58.50. Today, pay attention to the confirmation signal of the price retracing to around 58. For detailed positions, please consult the plugin.
(Crude Oil 15-Minute Chart)
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