Prices are rising! Gold and silver prices are once again "pulling back," and some central banks are beginning to consider selling off part of their gold reserves.

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Source: China Business News

International gold and silver prices have begun to “fluctuate” again. As of March 27, at the time of writing, international gold and silver prices have rebounded upward.

On March 26, Eastern Time, the spot gold closed down 2.79% at $4,379.68/ounce; COMEX gold futures fell 3.85% to $4,376.90/ounce. Spot silver dropped 4.38% to $68.06/ounce; COMEX silver futures fell 6.22% to $68.12/ounce.

As a result, on March 27, Chow Sang Sang’s gold jewelry was quoted at 1,364 yuan/gram, down 40 yuan from the previous day’s 1,404 yuan/gram; Lao Miao’s gold jewelry was quoted at 1,365 yuan/gram, down 45 yuan from the previous day’s 1,410 yuan/gram; Lao Feng Xiang’s gold jewelry was quoted at 1,368 yuan/gram, down 40 yuan from the previous day’s 1,408 yuan/gram.

Despite the geopolitical tensions in the Middle East and warnings from economic institutions about conflict risks, the news of the U.S. extending the pause period for strikes against Iran and smooth negotiation progress has eased risk aversion. This, combined with the uncertainty of major central bank monetary policies, has led to pressure on precious metal prices.

Analysts from Mitsubishi UFJ Financial Group (MUFG) stated: “Since the outbreak of the war, gold prices have fallen by about 15%. The main reason is the rise in inflation expectations triggered by rising energy prices, which decreases the likelihood of interest rate cuts and increases the possibility of monetary policy tightening. Additionally, the continued outflow of ETF funds has also pressured market sentiment, putting gold prices in a dilemma between geopolitical uncertainty and changing macroeconomic expectations.”

Data research agency Vanda estimates that since the outbreak of the war, global gold ETFs have experienced an outflow of approximately $10.8 billion.

Moreover, some central banks have begun to consider selling part of their gold reserves to raise funds. Data shows that as of the week ending March 20, Turkey’s central bank gold reserves fell from 820.8 tons to 771.8 tons. Bank personnel stated that the Turkish central bank’s gold reserves recorded the largest weekly decline since August 2018, with approximately 22 tons of gold sold in the previous week.

“Recently, the precious metals market has once again been playing around geopolitical news, falling under pressure.” The manager of the precious metals and new energy research center at Guotai Junan Futures analyzed that, on one hand, the market is worried that the U.S. may soon escalate military actions against Iran, and high oil prices have caused trading themes to revolve around “inflation expectations and monetary policy.” Currently, the market has increased bets on the Federal Reserve raising interest rates this year, the U.S. dollar index has strengthened again, and precious metal prices are under pressure once more. On the other hand, the recent rebound in precious metal prices has also reached a phase of pressure. Precious metal prices still lack clear upward drivers in the short term, and under the tug-of-war between bulls and bears, bears have regained an advantage, thus applying pressure on prices.

On March 26, local time, international crude oil futures prices surged. The price of light crude oil futures for May delivery on the New York Mercantile Exchange closed at $94.48 per barrel, an increase of 4.61%; the price of Brent crude oil futures for May delivery closed at $108.01 per barrel, an increase of 5.66%.

In terms of economic data, the U.S. Department of Labor announced that for the week ending March 21, initial jobless claims increased by 5,000 to 210,000, in line with market expectations; for the week ending March 14, continued claims fell to 1.82 million, the lowest level in nearly two years, indicating that the labor market remains resilient.

In the bond market, U.S. Treasury yields rose. The yield on the 10-year Treasury note rose to 4.404%, an increase of 7.8 basis points; the yield on the 2-year Treasury note was reported at 3.967%, an increase of 8.6 basis points. Interest rate futures indicate that the market expects about 15 basis points of room for rate hikes by the Federal Reserve within the year.

Bas Kooijman of DHF Capital stated that if U.S. Treasury yields rebound and oil prices soar again, especially if potential negotiations between the U.S. and Iran to end the conflict break down, gold may continue to face downside risks. This commodity may still be highly sensitive to diplomatic news and geopolitical developments in the Middle East and their impact on monetary policy expectations.

However, market views still believe that gold has long-term investment value.

Alejandro Bondavalli, a senior investment manager at Pictet Wealth Management, stated that the long-term investment value of gold remains solid. The uncertainties of policies and geopolitics have not diminished, and “de-dollarization” remains a strategic goal for central banks and investors worldwide. Gold still holds investment value for investors. The recent pullback presents a good opportunity to adjust strategic allocations, and after the current adverse factors recede, there will be strategic opportunities to position for a rebound in gold prices.

(Note: This article does not constitute any investment advice)

China Business News comprehensive report from CCTV News, The Paper, Yicai, and China News Service, among others

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Editor: Zhu Henan