Precious Metals Retreat Amid Easing Tensions: Gold and Silver Analysis

Precious Metals Pull Back From Recent Highs

Precious metals prices retreated on Tuesday, pulling back from recent record highs, influenced by a relative calm in global trade tensions and expectations of an imminent US government restart. This led to a decrease in safe-haven demand. Spot gold touched a low of $4245 per ounce in European trading, down about $130 from its intraday high. Simultaneously, spot silver plunged as much as 6%, nearing $49 per ounce. However, the precious metals trimmed their losses later in the day.

Factors Influencing Gold's Retreat

Technical indicators such as the Relative Strength Index (RSI) suggest that the strong rally in gold prices since the beginning of August may have been overextended. Furthermore, the stronger US dollar this week has increased the cost of purchasing precious metals for most buyers. At the same time, US National Economic Council Director Kevin Hassett hinted that the government shutdown crisis may end this week. The Federal Reserve is preparing for another interest rate cut at its meeting next week.

Precious Metals' Historic Rise in 2025

Precious metals prices have seen a remarkable rise this year, with gold achieving gains for the ninth consecutive week. Since 2025, gold prices have risen as much as 65%, supported by central bank purchases and inflows into Exchange Traded Funds (ETFs). Moreover, geopolitical and trade tensions, rising government debt levels, and threats to the independence of the Federal Reserve have contributed to heightened safe-haven demand, further boosting gold prices.

Silver's Rise Outpaces Gold

Concurrently, silver's rise has outpaced gold's, surging nearly 80% this year. In addition to the same favorable macroeconomic factors supporting gold, silver is also benefiting from a historic supply shortage in the London market. Currently, the London silver benchmark price is higher than New York futures prices, encouraging traders to ship silver to London to alleviate supply pressures.

Analyst Expectations

ANZ analysts believe that despite increased investor confidence in easing trade tensions, investors will continue to buy gold when prices dip. This is because the underlying economic and geopolitical uncertainties driving gold prices higher remain. They expect these factors to push gold prices to new record highs in 2026. Multiple banks, including HSBC, currently project gold prices to reach between $4700 and $5000 per ounce by 2026. As one analyst put it, "Every dip is being bought, and every pause is becoming a springboard." Gold's performance has certainly demonstrated this – minor corrections, strong recoveries, and obvious fair value gaps all speak volumes. IG's Chris Beauchamp said in an email that there still seems to be "plenty of money willing to jump on the gold train." The chief market analyst said that gold's "altitude sickness" appears to be just a blip. Beauchamp added that this may be of little comfort to those waiting for a "real correction." Fxstreet analyst Jasper Osita believes that as long as gold prices remain above the $4280 to $4300 level, every dip remains an opportunity in the larger bullish trend cycle. The next important psychological level lies at $4500, and unless there is a major shift in macro sentiment, reaching that target is more a question of "when" than "if."

Factors to Watch

* **Economic Data:** Inflation, GDP growth, and unemployment figures can all impact gold prices. * **Monetary Policy:** Federal Reserve decisions on interest rates can significantly affect gold prices. * **Geopolitical Developments:** Geopolitical events such as trade wars and conflicts can drive investors to safe-haven assets like gold. **Disclaimer:** This analysis is for informational purposes only and should not be considered investment advice.