Gold and silver prices plummeted for the second consecutive day on Wednesday, marking a significant halt to the recent rally in precious metals. The downturn was also reflected in the equities market, which declined following comments from US President Donald Trump that a meeting with Chinese President Xi Jinping may not take place.
The precious metals had experienced a substantial surge since the beginning of the year, with gold rising over 60% and hitting multiple records. Observers had suggested that gold could potentially reach $5,000 an ounce. The rally was driven by various factors, including a weaker US dollar, expectations of interest rate cuts, falling bond yields, and central bank buying. Additionally, concerns about the global economic outlook and a fear of missing out on the surge had contributed to the haven status of gold.
However, the buying momentum reversed on Tuesday, with gold prices tanking as much as 6% at one point. The retreat continued in Asia, driven by profit-taking, hopes for a further easing of China-US tensions, and a stronger US dollar. Gold hit a low of $4,000 on Wednesday, down from a record peak of $4,381.51 the previous day. Silver, which had been riding the coattails of the gold rally, also experienced a significant decline.
The downturn had a ripple effect on gold miners and producers, with Northern Star Resources in Sydney diving over 8% and Perseus Mining losing over 6%. Hong Kong-listed Zijin Gold International shed over 4%, while Shandong Gold Mining was down nearly 2%. Stephen Innes, a market analyst at SPI Asset Management, noted that gold’s “glorious charge finally met gravity” after months of relentless inflows. However, he added that the commodity would likely still retain support among investors due to underlying structural demand for insurance.
The selling pressure was matched by losses in equities, with most Asian markets falling after two days of strong gains. Trump’s comments on the potential meeting with Xi Jinping raised eyebrows, as he stated that “maybe it won’t happen” due to the complexity of the issues involved. The weak start in Asia followed a tepid day on Wall Street, with Hong Kong, Shanghai, Sydney, and Tokyo all experiencing declines. The downturn highlights the ongoing volatility in financial markets, driven by geopolitical tensions, economic uncertainty, and shifting investor sentiment.