Gold and silver prices dip, precious metals give back year-to-date gains overall.

International gold prices fell below $4,300 per ounce, with precious metals overall giving back their year-to-date gains. On June 8, precious metals on China's domestic futures market saw significant declines. As of the afternoon close, in the main domestic contracts, Shanghai silver fell 8.83%, Shanghai gold fell 3.67%, and platinum and palladium both fell more than 5%. In the international market, London spot gold prices once again dropped below the $4,300 per ounce mark, fully erasing their year-to-date gains. London spot gold has fallen about 1% year-to-date, while London spot silver has fallen about 7% year-to-date.

"Since May, gold prices have surged and then retreated, with the center of gravity shifting lower. As of June 8, the domestic spot price for 99.99% gold was 944.5 yuan per gram, down 7.45% cumulatively compared to early May," said Huang Jiaqi, a precious metals analyst at Zhuochuang Information. He stated that in early May, signals of peace talks between the US and Iran briefly pushed gold higher on expectations of "the reopening of the Strait of Hormuz and a moderation in inflation." However, as India, one of the major consuming countries, raised gold import tariffs, the dovish Fed voter Milan resigned, and the US and Iran remained deadlocked on key issues like uranium enrichment, gold entered a downward channel in mid-to-late May. As of now, no formal agreement has been reached between the US and Iran, while the resumption of hostilities between Israel and Iran and US non-farm payroll data significantly exceeding expectations have led the market to almost fully price in expectations of a Fed rate hike. The prospect of tightening liquidity is weighing on gold's price performance.

Zhan Dapeng, a non-ferrous metals analyst at Everbright Futures, also stated that on the macro front, the U.S. has been releasing dense economic data, providing a dual verification of economic resilience and inflationary pressure. On the economic side, the ISM manufacturing PMI rose to 54, the highest level since May 2022, with the new orders index jumping 2.7 points to 56.8, remaining in expansion territory for five consecutive months. However, the prices paid index remained as high as 82.1, staying in the high-risk zone above 80 for two consecutive months, indicating that energy cost pressures from the Middle East conflict are being transmitted downstream.

He believes that more critically, the U.S. added 172k non-farm payroll jobs in May, far exceeding the market expectation of 85k; the April data was revised up to 179k, and the unemployment rate remained unchanged at 4.3%. The resilience of the economy and job market, coupled with the backdrop of a sustained rebound in inflation, has rapidly compressed market expectations for a Fed rate cut while further heating up expectations for a rate hike. Multiple Fed officials have taken a hawkish stance, with Waller supporting the removal from policy statements of language leaning towards rate cuts.

On the geopolitical front, the US-Iran negotiations are playing a game of extreme brinkmanship, which also introduces uncertainty into forecasts for the Middle East situation, adding to market volatility.

However, data released by the People's Bank of China on June 7 showed that gold reserves increased to 74.96 million ounces at the end of May, with an addition of 320k ounces during the month, marking 19 consecutive months of increases. This is also the largest single-month increase since the continuous increases that began at the end of 2024. The move to increase gold purchases against the backdrop of falling gold prices suggests a strong long-term strategic allocation intent.

Zhan Dapeng believes that the near-term focus for precious metals lies in the Fed's June interest rate meeting. Although the market has compressed the possibility of a rate cut this year to near zero, and the probability of a rate hike is steadily rising in market pricing, there is still hope to see the Fed's attitude towards the nature of inflation and expectations for rate cuts. For gold, expectations of higher real interest rates in the US imply persistently high opportunity costs of holding. Global gold ETFs have seen sustained net outflows since May, and COMEX speculative long positions have been significantly reduced. The market is in a range-bound tug-of-war between "hawkish expectations dominating" and "geopolitical risk aversion providing support," making it more likely for gold prices to oscillate and consolidate within the $4,000-$4,500 per ounce range.

"In the future, continue to lower expectations for gold prices in the first half of the year. Pay attention to whether there will be abnormal 'buy the rumor, sell the fact' volatility around the Fed meeting, while also monitoring the progress of US-Iran negotiations. Silver, platinum, and palladium are broadly following gold lower, but with significantly higher volatility. If a substantial US-Iran ceasefire moves forward and gold stabilizes, silver, platinum, and palladium may see a corrective catch-up rally. Until then, caution is advised," he said.

[Author: Zhao Liyun] (Editor: Wen Jing)

Keywords: Gold, Silver