The recent drop in gold and silver prices reflects an ongoing correction that has persisted since these metals reached record highs in mid-October. After an initial decline and a brief rebound in early November, the current downturn signifies a consolidation phase, indicating that the market is still trying to find its footing after a period of strong trends.
Both the fundamental and technical aspects suggest that this indecisiveness may hang around for a little while longer. Although the general upward trend remains intact, a clear driving force isn’t evident, leading to a likely volatile trading environment. There are still expectations for new record highs, but those may not materialize until early next year, rather than in the latter half of 2025.
On the fundamental side, the uptrend in gold and silver seems to have hesitated, especially with the easing of US-China trade tensions, thanks to a one-year agreement that aims to halt further tariff escalations. This development has diminished a significant layer of risk that had been pushing traders toward precious metals. As geopolitical concerns ease, the immediate need for an extended rally appears to have diminished.
This recent decline has also been driven by shifting expectations around the Federal Reserve’s actions. The possibility of a rate cut in December is now considered a toss-up, which makes interest-free assets like gold and silver less appealing, at least for the time being. Nevertheless, once the current uncertainties clear up, support for these metals might re-emerge in the easing cycle expected next year.
However, it’s important to note that macroeconomic visibility doesn’t improve overnight. Yes, US data releases are coming back online after the recent shutdown, but neither the Federal Reserve nor market participants will fully grasp the economic fundamentals until the data publishing schedule returns to normal in December. This delay could lead to cautious policymaking and hesitant investor behavior.
From a technical perspective, gold’s drop from 4,381.22 to 3,886.41 marks the beginning of an uptrend correction pattern from 3,267.90. The second leg from last week likely concluded at 4,244.86. A deeper dip towards the 55-day exponential moving average (currently at 3,907.78) appears favorable, where some support might arise. However, if the price breaks through, it could potentially target a point at 3,750.05, indicating where the correction could finish.
Silver exhibits a similar trend. After falling from 54.44 to 45.52, it made a slight recovery to 54.36, just shy of its previous peak. If it continues to trade below the 55 four-hour EMA (currently at 50.678), it would solidify a corrective pattern, propelling it toward the 55-day EMA (currently at 46.99) or possibly lower. Strong support is anticipated around the 45.52 level, which could limit declines and help finalize the consolidation phase.
