Gold and silver prices slide, causing precious metals to give back their year-to-date gains

International gold prices fell to below $4,300 per ounce, and precious metals as a whole gave back their year-to-date gains. On June 8, China’s domestic futures market saw a notable drop in precious metals. By market close in the afternoon, among domestic front-month contracts, Shanghai Silver fell 8.83% and Shanghai Gold fell 3.67%, with both platinum and palladium down more than 5%. In the international market, London spot gold again fell below the $4,300 per ounce threshold and has completely reversed its year-to-date gains. London gold spot is down about 1% year-to-date, while London silver spot is down about 7% year-to-date.

“Since May, gold prices have surged and then retreated, with the focus shifting downward. As of June 8, domestic spot 99.99% gold was quoted at 944.5 yuan per gram, down 7.45% in total compared with early May.” Huang Jiaqí, a precious metals analyst at Zhuochuang Information and Fubao, said that in early May, signals from the U.S. and Iran about resuming talks prompted gold to briefly spike on expectations of “shipping through the Strait of Hormuz returning to normal and easing inflation falling.” However, as India—one of the major consumer countries—raised gold import tariffs, a dovish voting member of the Federal Reserve, Milan, resigned, and the U.S. and Iran remained stuck on key issues such as uranium enrichment, gold entered a downward channel in late May to early June. And up to now, the U.S. and Iran still have not reached a formal agreement. Meanwhile, the restarting of fires between the U.S. and Iran and U.S. non-farm employment data coming in far above expectations have caused the market to almost fully price in expectations of additional Fed rate hikes, pressuring gold prices with a tighter liquidity outlook.

Dacheng Peng, a metals analyst at Everbright Futures, also said that on the macro front, the U.S. is releasing a cluster of economic data, with economic resilience and inflation pressure providing double validation. On the economic side, the ISM manufacturing PMI rose to 54, the highest level since May 2022. The new orders index increased sharply by 2.7 points to 56.8 and has remained in the expansion range for 5 consecutive months. But the prices-paid index is still as high as 82.1, staying in a high-risk zone above 80 for two consecutive months, indicating that energy cost pressure caused by the conflict in the Middle East is being transmitted to downstream sectors.

He believes the more crucial factor is that U.S. May added 172k non-farm jobs, far exceeding market expectations of 85k. The April data were revised up to 179k, while the unemployment rate stayed unchanged at 4.3%. With economic and labor market resilience layered with the backdrop of ongoing inflation rebound, market expectations for Fed rate cuts have been quickly squeezed, while rate-hike expectations have been further heating up. Several Fed officials have taken hawkish stances, and Waller supports removing rate-cut-leaning wording from policy statements.

Meanwhile, on the geopolitical front, negotiations between the U.S. and Iran have been playing out with extreme back-and-forth, which also creates uncertainty in predictions for the situation in the Middle East and adds market volatility.

However, data released by the People’s Bank of China on June 7 showed that as of the end of May, gold reserves increased to 74.96 million ounces, with net purchases of 172k ounces during the month, marking the 19th consecutive month of net buying and the largest single-month increase since the streak of consecutive buying that began at the end of 2024. Against the backdrop of gold prices under pressure and moving lower, boosting purchases against the trend suggests strong implications for long-term strategic allocation.

Peng Dacheng said that in the short term, the core focus for precious metals is the Fed’s June policy meeting. Although the market has already compressed the possibility of Fed rate cuts within the year to nearly zero and the probability of rate hikes has been steadily rising in market pricing, investors still hope to read the Fed’s stance on inflation characterization and rate-cut expectations from it. For gold, higher expected real U.S. interest rates imply that the opportunity cost of holding gold remains persistently high. Global gold ETFs have continued to see net outflows since May, COMEX speculative long positions have been cut sharply, and the market is forming a range tug-of-war between “hawkish expectations dominating” and “geopolitical risk-off providing a backstop.” As a result, gold prices may be more likely to trade in a range and consolidate between $4,000 and $4,500 per ounce.

“Looking ahead, we expect the coming period to continue lowering forecasts for gold prices for the first half of the year. Pay attention to whether, around the Fed meeting, the market shows abnormal volatility of ‘buy expectations, sell facts.’ Also watch progress in U.S.-Iran negotiations. Silver, platinum, and palladium generally move in line with gold lower, but their volatility is significantly higher than gold. If a real ceasefire and concrete progress in U.S.-Iran talks are achieved alongside confirmation that gold has stabilized, silver, platinum, and palladium may see a catch-up rebound. Until then, caution is warranted.” he said.

【Author: Zhao Liqing】 (Editor: Wen Jing)

Keywords:

                                                            Gold
                                                            Silver