After several weeks of rallying despite headwinds, gold and silver prices have seen a dip this week, offering a potential buying opportunity for investors.
Gold set another record close this past weekend at $2,391 per ounce but has pulled back as markets opened for the week. Gold saw a sharp drop all the way down to $2,292.70 per ounce yesterday but appears to have found some support at $2,300.
Silver also dropped sharply, from $28.68 at the weekend close to a low of $26.70 yesterday. It has also recovered some of the losses however and found support above $27 so far today.
Despite the dramatic pullback, it is important to put it in the context of the mammoth rise in prices since the start of March (as shown above). Gold is still up 13% in the past three months, with silver up 19% in the same period. With such a large surge in prices, a pullback was inevitable at some point, and it remains positive for both metals that the drop so far has stabilised quite quickly.
In recent weeks, markets have adjusted expectations for rate cuts, with September seen as the likely meeting for the Fed to make their first rate cut in the US. This has left the US Dollar Index actually up 1.35% in the past month and would have been considered very negative for gold. Events between Israel and Iran have also settled for now it seems, without further escalation as feared.
Trading regulations in China, the country which has been touted as the key driver behind gold's recent rally, have been tightened. Restrictions were placed on the number of daily contracts tradeable in futures on the Shanghai Futures Exchange, and price limits were placed on gold and silver via the Shanghai Gold Exchange. These restrictions have helped to cool down the gold and silver market after the seven weeks of gains.
Without the boost of Chinese buying, gold and silver have returned to more normal trading conditions, and after such quick gains, profit-taking is certainly also putting pressure on the metals. Gold and silver are holding up however, and the dip has been seen as a buying opportunity for many investors. Rate cuts and a Biden-Trump rematch will make Q4 2024 a very interesting period for precious metals and could see even higher highs for gold and silver, making the current dip a good time to buy.
