Gold is down another 4% today as it closes in on $4,300 while silver is down 6% on the day as nears $64. It's starting to get rough out there as precious metals are hit by a trifecta of negative factors.
The US-Iran conflict might have seemed like a good reason for precious metals to gain on geopolitical tensions. That was the case in January amid tensions between the US and Venezuela. But when higher oil prices start coming into the picture, this is a totally different ball game.
The first negative factor is a major shift in big picture outlook for markets. For over two years now, precious metals could fall back on major central banks cutting interest rates as a key upside driver. However, the scrip has flipped on its head now. As inflation fears creep in, central banks are now having to quickly pivot to rate hikes instead. And that's a big change for trading sentiment in precious metals as well.
The latest drag last week was a significant one. And that is where the second factor comes in, that being a technical one. The drop on Friday had a lot riding on it as we see both gold and silver drop below their respective 100-day moving averages (red line). That's the first meaningful break below that for gold since 2023 and for silver, it's the first since a brief dip in April 2025. That aside, it's also the first material technical break below the key level for silver since 2023 as well.
And the charts are looking really, really rough at the moment.
For gold, it is already running a break below the 2 February low with some minor support closer to $4,275. Otherwise, we look to be in for a deeper rout here with eyes on the 200-day moving average (blue line) at $4,091 next.
For silver, it is now taking a run at the 6 February low near the $64 level. A firm break below that opens up the floodgates towards the 200-day moving average (blue line) closer to $57.45 at the moment.
The technical signs are certainly compelling, in the sense that it would not be wise to try and pick at bottoms here. And in other words, it looks like there will be more pain to come before things get better.
Adding to all this is the third factor and that is added selling in the likes of bonds and stocks. In the past year, precious metals have been a favoured position undertaking for leveraged trades. But when we see a broader market selloff such as this one and especially one that looks like it can turn really bad for stocks too, be very mindful of the impact of margin calls. From Friday:
"Besides the point in equities, keep an eye out for the likes of precious metals too. If you think the heavy selling at one point yesterday was bad, wait until we see stocks trigger stops on any further break lower from this point. That can cascade further to margin calls and trigger more volatile selling in the likes of gold and silver as market players need to front up the cash."
