Gold and silver prices experienced notable declines on Thursday, with gold falling below $5,300 per ounce after briefly surpassing $5,600 earlier in the day. The drop in precious metals coincided with a significant selloff in the stock market, highlighted by a more than 2% plunge in the Nasdaq Composite, largely fueled by disappointing quarterly earnings from Microsoft. Investors reacted to updated forecasts indicating higher-than-expected capital spending and a slowdown in cloud sales growth.
This downturn marked a stark change in the trajectory of precious metals, which had seen a meteoric rise recently. As the U.S. dollar rebounded from its lowest point since early 2022, this rally in gold and silver began to lose momentum. Ole Hansen, the head of commodity strategy at Saxo Bank, commented on the situation, remarking, “The continued surge across metals, especially gold and silver, is entering a dangerous phase, in my opinion.” He expressed concern about increasing volatility and thinning liquidity in the market.
Year to date, gold prices had surged approximately 20%, largely attributed to a weakening dollar against other major currencies. Just the previous week, Goldman Sachs analysts had estimated a year-end price target for gold at $5,400, suggesting that investor interest from the private sector could drive prices even higher.
Gold’s climb had been bolstered by the Federal Reserve’s decision to maintain interest rates, accompanied by remarks from Fed Chair Jerome Powell that did little to support the dollar. In the lead-up to Thursday’s decline, Robin Brooks, a senior fellow at the Brookings Institution, noted a strong conviction in the “Dollar-down trade,” reinforcing the narrative that a weak dollar was amplifying speculation around asset debasement.
In a parallel movement, silver prices plunged nearly 3% to the vicinity of $106 per ounce, following a significant rally that had seen it peak around $120. Despite this recent downturn, silver remains up 42% for the year, attributing part of its growth to unprecedented momentum over the past year. Analysts from JPMorgan cautioned that while prices had already exceeded their predicted averages, determining the peak in a market experiencing such rapid increases is inherently challenging.
As market participants continue to seek insights and analysis, the evolving dynamics of both precious metals and the broader market remain closely monitored, especially amid fluctuating economic conditions and shifting investor sentiment.
