Is the gold rally over? 3 factors determine the path of the yellow metal after a violent decline
Gold and silver continued their sharp decline today, Monday, adding to the losses incurred since last Friday, as the rise of the dollar and profit-taking slowed the upward momentum that had pushed Precious metals reached record levels a few days ago.
The price of gold today fell by about 6% to $4,538 per ounce, after falling by nearly 10% on Friday. Silver, which rose alongside gold, was also under severe pressure after its sharp decline of 30% last Friday, which witnessed its worst day since March 1980.
Correction or collapse?
According to analysts, this significant decline in gold prices came after the decline in optimism regarding the reduction of US interest rates, and the nomination of a new head of the Federal Reserve Bank, which prompted traders to rearrange their cards.
Jose Torres, chief executive officer of the Federal Reserve, said: Economists in the company "Interactive Brokers"In a note on Monday: "As a result, the strategy returned "Buy American products"The sharp decline that pushed gold and silver prices to record high levels began to fade"
Explained Christopher Forbes, President of the Asia and Middle East Department at the company "CMC Markets"that the sharp decline in gold reflects a traditional correction after an exceptional rise, and not a collapse in long-term bullish expectations.
Forbes described gold’s decline as "A temporary decline after an exceptional rise". He added that "Profit taking, the rise in the value of the dollar, and recent geopolitical developments in Washington all contributed to calming the market".
Effect "Warsh"
US President Donald Trump suddenly announced the nomination of Kevin Warsh, an advocate of tight monetary policy, to lead the Federal Reserve.
This nomination contributed to strengthening Dollar At the same time, Trump’s comments indicating the possibility of reaching an agreement with Iran appear to have eased geopolitical concerns, as West Texas Intermediate crude futures fell by about 4% on Monday.
Forbes stated that gold prices will remain high but will fluctuate in the near term, pending further clarity on Warsh’s political orientations.
Silver prices are still up about 16% since the beginning of the year, while gold prices have risen by about 8% since the beginning of the year. The beginning of the year. Both gold and silver saw record highs last year.
Speculators Exit
The Chicago Mercantile Exchange Group raised margin requirements following last week’s market sell-off, effective Monday after the market closed.
Margins on COMEX gold futures contracts were raised to 8% from 6%, while COMEX silver futures margins (5,000 ounces) were raised to 15% from 11%.
Reducing the leverage ratio in gold trading led to the exit of a large number of speculators from the market, which reduced global demand for gold. On the other hand, stock losses prompted investors to sell gold in order to cover their losses.
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