Pulling, as they say, "an owl on a globe" in search of the reasons for the sale, apart from purely technical factors (overbought and overloaded leverage in the paper market), there should naturally always be some kind of catalysts for shifts in the markets.
This time, the news came in the form of rumors about China's willingness to stop selling American debt securities as one of the terms of a trade deal with the United States, as well as information (unconfirmed) that the Central Bank of Argentina is dumping gold reserves.
Recently, many banks and analysts have advocated adding gold to their portfolios, and this rhetoric, combined with the growth of gold and silver to record levels, has attracted a new wave of speculative purchases.
Gold and silver have become objects of impulse trading, and momentum brings with it fragility, and as a result, the factor of oversupply of long positions in funds and impulse sales has worked, and to this has been added the factor of local liquidity compression.
When prices fell, weak long positions (with leverage), trend-following funds (CTAs), and hedge funds opening short positions all rushed to the exit, triggering an avalanche of sales.
What prospects can there be now? Even after the aggressive sell-off, the gold price is still 50% higher than at the beginning of the year, and the silver price is 60% higher. In fact, it was an exceptional price rally, and the deeper decline in the silver price during this sale reflects the fact that it has outperformed gold this year and does not have the same financial support from central banks that gold has.
We should not forget about China's long-term strategy, as it is steadily accumulating gold reserves and positioning itself as an important new global gold trading center.
China sees a strong gold price as a way to secure the yuan and build confidence in its financial system. Here
You have to be realistic. Any detente in trade tensions between America and China is only a pause, and it is unlikely that their contradictions will be resolved in the coming years.
A survey of central banks conducted by the World Gold Council shows that 75% of the world's central banks plan to increase their gold reserves over the next five years. That is,
There are no changes in the strategic plan, and the Central Banks of the world will continue to diversify assets as a strategy to avoid potential risks not only in, but also from other fiat currencies.
In any case, we can say that the price rally of recent years is unlike previous periods of growth. China takes gold when the dollar is strong,
