Recent Historical Decline in Gold and Silver: What Should Investors Do?

Search for Balance in Gold and Silver

Recent years have seen the most severe sales leading to a decline in the market values of gold and silver. Investors, concerned that the rises in precious metals could lead to overvaluation, have turned to profit-taking.

Spot gold is trading at around 4,090 dollars per ounce, and this price marks the most severe daily decline in the last 12 years following a 6.3% drop in the previous session. Silver also experienced a loss of up to 8.7% on Tuesday. Technical indicators suggest that the rallies in both metals have become overheated.

Rapid Rise Since August

This pullback has delivered an abrupt blow to the rapid upward trend that has been ongoing since mid-August. Expectations that the Federal Reserve will make an interest rate cut before the end of the year had supported gold; gold is still showing a nearly 60% increase since the beginning of the year.

Analysts' Assessments

ABC Refinery's global manager Nicholas Frappell commented, "Investors may have decided to realize their profits since they are in a profitable position." Citigroup retracted its "increase weighting" recommendation following the sharp drop, expressing expectations that gold could drop to 4,000 dollars in the coming days.

Expectation of a Wave of Sales

The declines occurred under the shadow of rising tensions between the U.S. and China. U.S. President Donald Trump stated on Wednesday that he hopes for a good agreement from the upcoming meeting with China.

AT Global Markets' chief analyst Nick Twidale noted that the movement in gold currently represents a significant correction, saying, "Major fund shifts in the market have led some key players to take profits, which can trigger downward sell orders."

In silver, price movements have been more dramatic than in gold. The historical squeeze experienced in the London market caused prices to exceed the record set in 1980. On Tuesday, the Shanghai Futures Exchange recorded the largest drop in silver stocks.

In the morning hours, spot gold decreased 0.9% to 4,091.63 dollars, while silver fell 0.4% to 48.5377 dollars.