Precious Metals Bloodbath: Gold Plummets Sharply and Silver Records Heavy Losses
The precious metals markets faced a strong selling wave today, in a scene described by traders as "price bleeding," as gold continued its losses and silver dropped sharply by 5%, amid a rise in the dollar and weak trading in Asia due to the Lunar New Year holiday.
* Gold Declines 2% Under Dollar Pressure
Gold fell in spot transactions by about 1.9% to reach 4895.44 dollars per ounce by 05:30 GMT, after losing 1% earlier in the session.
U.S. gold futures for April delivery also dropped by 2.6% to record 4917.70 dollars per ounce.
This decline coincided with a 0.2% rise in the dollar index against a basket of currencies, making the yellow metal more expensive for holders of other currencies, according to data reported by Reuters.
The U.S. markets were closed yesterday, Monday, in observance of Presidents' Day, while the markets in China, Hong Kong, Singapore, Taiwan, and South Korea were closed due to the Lunar New Year holiday, leading to weak trading volumes and increased price volatility.
* Bets on U.S. Rate Cuts
The "FedWatch" tool from the CME Group indicates that markets currently expect the U.S. Federal Reserve to implement three rate cuts during this year, each by 25 basis points.
Gold is known as a non-yielding asset, so it typically benefits from lower interest rates, as the attractiveness of alternative yields like bonds diminishes.
* Political Developments Increase Anticipation
Politically, U.S. President Donald Trump stated that he would participate "indirectly" in talks between the United States and Iran regarding Tehran's nuclear program, which are set to begin today, Tuesday, in Geneva, expressing his belief that Iran wants to reach an agreement.
Before the new round of talks, Iranian Foreign Minister Abbas Araghchi met with the Director General of the International Atomic Energy Agency, Rafael Grossi, amid ongoing threats of potential U.S. military action if the diplomatic path falters, with no clear indications of either side's willingness to make significant concessions.
* Silver Drops 5% and Other Metals Decline
Silver was not immune to the pressures, as it fell in spot transactions by 5% to 72.66 dollars per ounce, after losing more than 3% earlier in the session.
Platinum also decreased by 2.6% to record 1997.57 dollars per ounce, while palladium dropped by 1.5% to 1698.10 dollars per ounce.
In conclusion, the precious metals markets currently stand at a crossroads between the pressures of a strong dollar and anticipation of U.S. interest rate decisions, along with geopolitical developments, keeping prices vulnerable to further fluctuations in the coming days.
