【Gold Price Trend】Gold and silver sharply decline then rebound; gold price in Asia surpasses $5,100; silver rebounds 3% to $85

Trump announces insurance guarantees for ships passing through the Strait of Hormuz and states that if necessary, the U.S. Navy will begin escorting oil tankers through the Strait. This move is expected to restore oil transportation, stabilize oil prices, and after a sharp drop, gold and silver prices rebounded. Gold prices in Asian trading on Wednesday rose back above $5,100, at $5,180, up 1.8%. Silver rebounded 3.7%, at $85.08.

Previously, market concerns about escalating Middle East tensions pushed oil prices higher, sparking inflation fears and reducing expectations of multiple rate cuts by the Federal Reserve this year. The dollar surged, dragging down precious metals. Gold ended a four-day rally, briefly falling below $5,000 per ounce, dropping over 6% to a low of $4,996, and closed down 4.4% at $5,088.7. Silver also fell over 12%, hitting a low of $77 per ounce, and closed down over 8% at about $82.05.

Thu Lan Nguyen, Head of FX and Commodities Research at Deutsche Bank, said that the experience of rising oil prices and global inflation following the Russia-Ukraine war in 2022 could serve as a blueprint for the current situation. She noted that the Fed quickly raised interest rates at that time, strengthening the dollar, and gold prices weakened throughout the year.

Peter Kinsella, Head of Global FX Strategy at Union Private Bank (UBP SA), said that the gold market is experiencing a typical “portfolio risk aversion” move, which is consistent with past conflict scenarios. However, he pointed out that futures market long positions in gold are not particularly high, which should limit any downside. He also believes that the long-term drivers remain unchanged, and gold will definitely rebound. “If there is any change, it’s that the uncertainty of war outcomes highlights the ongoing geopolitical risks more than ever before.”