As China's Lunar New Year holiday gets underway, gold and silver prices have fallen sharply amid weaker Asian demand. Gold futures slipped below the $5,000 level on Tuesday as support for the metal eased, while silver dropped to $74.24 an ounce.
Ole Hansen from Saxo Bank said that the decline underscores the critical role of Asian, particularly Chinese, demand in driving recent price gains.
“The move highlights the importance of Asian — and especially Chinese — demand, which helped propel prices higher in recent months,” wrote Hansen.
#Gold and #silver trade sharply lower amid muted activity, with much of Asia closed for the Lunar New Year. The move highlights the importance of Asian — and especially Chinese — demand, which helped propel prices higher in recent months. While geopolitical tensions in the Middle… pic.twitter.com/4odr3GMx3f
Hansen noted that rising bearish sentiment on the U.S. dollar heightens the risk of a rebound. He referenced a Bank of America survey of 42 fund managers, which revealed the most bearish dollar positioning in 14 years, potentially intensifying downward pressure on commodities.
The analyst indicates gold’s support near $4,860, with the next level at $4,670, while silver's lower highs suggest weakening momentum and potential downside toward $70.
Gold Momentum Signals Broader Moves
Gold surged above the $5,000 per ounce mark on Friday, following cooler-than-expected inflation. Additionally, gold has been one of the defining market stories in recent years, with the SPDR Gold Shares (NYSE:GLD) rallying over 175% since October 2023, far outpacing the SPDR S&P 500 ETF Trust (NYSE:SPY)‘s 75% return.
A Goldman Sachs report led by analyst Lina Thomas suggests the gold rally may indicate broader trends in the commodity market, beyond its traditional role as a safe-haven asset.
The Asian market, particularly China, has been instrumental in driving up prices in recent months through central bank purchases, arbitrage trading, and growing household demand, with Torsten Slok, the chief economist at Apollo Global Management, suggesting that global central banks may soon hold more gold than U.S. dollars as a reserve.
China’s Surging Gold Demand Raises Concerns
Société Générale estimated China’s gold accumulation to be as much as 250 tons in 2025 when measured through trade flows, making it responsible for more than one-third of global central-bank demand. Notably, Beijing's approach seems designed to limit transparency, and most analysts doubt that the reported monthly figures truly reflect actual purchasing activity.
Meanwhile, Treasury Secretary Scott Bessent indicated to the Senate that China might also be developing gold-backed digital assets in Hong Kong instead of using the yuan.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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