https://www.tradingview.com/x/QPWRmy27/
Yesterday, the rally in global risk assets paused, notably with safe-haven assets gold and silver prices plunging again. Spot gold fell by more than 2% intraday, briefly dipping below the $3,900 per ounce mark. It subsequently recovered, narrowing its losses. Currently, the gold correction may last for several months. However, it is expected that after the correction, if investors continue to increase their investments, the gold rally may continue.
The sudden collapse of gold prices was not without warning, but rather the result of multiple factors converging and resonating together. In the short term, factors such as geopolitical easing, a stronger dollar, and overbought technical conditions all contributed to this outcome.
The easing of geopolitical tensions was the direct trigger for this sharp drop.
On October 21, leaders of Germany, France, the UK, and other countries jointly issued a statement supporting "an immediate cessation of military operations and negotiations starting from the current line of contact." Ukrainian President Zelensky also signed the statement. This development means that the more than three-year-long Russia-Ukraine conflict may be entering a substantial ceasefire phase. Meanwhile, tensions in the Middle East eased, with progress in ceasefire negotiations between Israel and Hamas reducing the risk of a large-scale ground offensive. The cooling of these two major geopolitical hotspots directly led to a rapid decline in market risk aversion.
A short-term strengthening of the US dollar also put downward pressure on gold prices.
The US government passed a temporary funding bill, averting a government shutdown and strengthening expectations of policy stability. The US dollar index found support around 98.57 and rebounded slightly. Since gold is priced in US dollars, the two typically exhibit a negative correlation; a stronger dollar directly reduces gold's attractiveness to international investors.
The overbought condition on the technical front exacerbated this process.
Gold prices had already reached the upper limit of three standard deviations before the pullback, a typical extreme market condition. Under these circumstances, the market itself faced downward pressure. London spot gold trading volume surged to 4.37 million lots, a 180% increase from the previous day. When gold prices broke through the key support level of $4,200, the algorithmic trading systems of 47 financial institutions worldwide triggered stop-loss orders, dumping 120,000 short contracts in 0.5 seconds. The market had no time to react, and the panic selling spread rapidly like dominoes.
Furthermore, the Chicago Mercantile Exchange announced a 5.5% increase in margin requirements for gold futures, directly reducing leverage. Investors needed to provide more funds as margin to trade, and many speculators, unable to bear the increased financial pressure, simply liquidated their positions and left, further increasing selling pressure in the gold market.
Yesterday, the rally in global risk assets paused, notably with safe-haven assets gold and silver prices plunging again. Spot gold fell by more than 2% intraday, briefly dipping below the $3,900 per ounce mark. It subsequently recovered, narrowing its losses. Currently, the gold correction may last for several months. However, it is expected that after the correction, if investors continue to increase their investments, the gold rally may continue.
The sudden collapse of gold prices was not without warning, but rather the result of multiple factors converging and resonating together. In the short term, factors such as geopolitical easing, a stronger dollar, and overbought technical conditions all contributed to this outcome.
The easing of geopolitical tensions was the direct trigger for this sharp drop.
On October 21, leaders of Germany, France, the UK, and other countries jointly issued a statement supporting "an immediate cessation of military operations and negotiations starting from the current line of contact." Ukrainian President Zelensky also signed the statement. This development means that the more than three-year-long Russia-Ukraine conflict may be entering a substantial ceasefire phase. Meanwhile, tensions in the Middle East eased, with progress in ceasefire negotiations between Israel and Hamas reducing the risk of a large-scale ground offensive. The cooling of these two major geopolitical hotspots directly led to a rapid decline in market risk aversion.
A short-term strengthening of the US dollar also put downward pressure on gold prices.
The US government passed a temporary funding bill, averting a government shutdown and strengthening expectations of policy stability. The US dollar index found support around 98.57 and rebounded slightly. Since gold is priced in US dollars, the two typically exhibit a negative correlation; a stronger dollar directly reduces gold's attractiveness to international investors.
The overbought condition on the technical front exacerbated this process.
Gold prices had already reached the upper limit of three standard deviations before the pullback, a typical extreme market condition. Under these circumstances, the market itself faced downward pressure. London spot gold trading volume surged to 4.37 million lots, a 180% increase from the previous day. When gold prices broke through the key support level of $4,200, the algorithmic trading systems of 47 financial institutions worldwide triggered stop-loss orders, dumping 120,000 short contracts in 0.5 seconds. The market had no time to react, and the panic selling spread rapidly like dominoes.
Furthermore, the Chicago Mercantile Exchange announced a 5.5% increase in margin requirements for gold futures, directly reducing leverage. Investors needed to provide more funds as margin to trade, and many speculators, unable to bear the increased financial pressure, simply liquidated their positions and left, further increasing selling pressure in the gold market.
Trade attivo
The international situation is changing rapidly. Can you grasp the current situation?
Hey, everyone. I'm Yulia, a girl from Russia working as an analyst in New York, USA. I've been doing this job for 13 years. I have professional financial knowledge. I hope you like me.
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Le informazioni ed i contenuti pubblicati non costituiscono in alcun modo una sollecitazione ad investire o ad operare nei mercati finanziari. Non sono inoltre fornite o supportate da TradingView. Maggiori dettagli nelle Condizioni d'uso.
Hey, everyone. I'm Yulia, a girl from Russia working as an analyst in New York, USA. I've been doing this job for 13 years. I have professional financial knowledge. I hope you like me.
Pubblicazioni correlate
Declinazione di responsabilità
Le informazioni ed i contenuti pubblicati non costituiscono in alcun modo una sollecitazione ad investire o ad operare nei mercati finanziari. Non sono inoltre fornite o supportate da TradingView. Maggiori dettagli nelle Condizioni d'uso.