Last Friday, the international gold market faced a fierce sell-off, with spot gold prices dropping more than 3% in a single day, erasing all of the gains from the previous week. This decline was driven by concerns of an economic recession triggered by a rapidly escalating global trade war and the pervasive downward pressure in financial markets. Investors sold off gold to gain liquidity, causing a chain reaction of tumultuous market volatility.
Data shows that spot gold fell 2.6%, closing at $3,030.66 per ounce, with an intraday low of $3,016.49, after reaching a record high of $3,167.57 the previous trading day. U.S. gold futures also dropped 2.3% to $3,049.20. Despite this, technically, spot gold temporarily held the key support level of the 21-day moving average at $3,023.
In the turbulent market environment, gold's traditional role as a safe-haven asset experienced a brief "malfunction." Amid sharp declines in equities, bonds, oil, and other assets, gold, considered one of the most liquid assets, is often among the first in a portfolio to be sold to meet margin calls in other markets. This phenomenon aligns with gold's historical performance pattern during high-risk events.
Although the recent steep drop is alarming, gold has maintained a strong upward trend over the year. Amid central banks' continued purchases and a backdrop of global economic and geopolitical uncertainty, gold prices have risen approximately 15.6% this year, maintaining its value as an asset allocation favored by global investors.
Meanwhile, newly released U.S. employment data exceeded expectations, prompting the market to reassess the Federal Reserve's future monetary policy path. Strong data might mean a further delay in rate cuts, restraining the short-term price of non-yielding assets like gold in a high-interest-rate environment.
The silver market struggled as well, with prices plummeting 7.2% to $29.59 per ounce, marking its worst weekly performance since September 2020. Platinum dropped 3.6%, closing at $918.35, and palladium fell 1.9% to $910.94, both recording weekly declines, highlighting the pressure on the precious metals market overall.
Overall, global risk-aversion sentiment remains strong, but the flow of safe-haven funds is experiencing short-term disruptions. Precious metals like gold are undergoing a sharp liquidity-driven adjustment, making future trends dependent on policy guidance, macroeconomic data changes, and developments in trade relations.
