Gold and silver prices diverged on Wednesday. The most active gold futures contract on the Shanghai Futures Exchange hit an intraday high above 1,100 yuan, ultimately settling at 1,092.30 yuan per gram. Silver experienced high-level volatility, with the most active silver contract edging down to close at 23,131 yuan per kilogram. What are the key drivers for gold and silver currently, and what risks should be monitored for the outlook?
Fundamental Analysis: First, geopolitically, tensions are escalating around Greenland, accompanied by persistent tariff threats between the US and Europe. The US has stated it does not rule out "forcibly taking the island" and has threatened to impose additional tariffs on several European nations. Europe responded swiftly, with a Danish pension fund planning to reduce its holdings of US Treasury bonds. Overnight, US financial markets faced a simultaneous sell-off in stocks, bonds, and the dollar, undermining confidence in dollar-denominated assets. Additionally, Japan announced a series of measures to relax fiscal policy, leading to a sell-off in Japanese government bonds and a weaker yen, which further boosted safe-haven demand and pushed gold prices higher.
Second, macroeconomically, numerous uncertainties persist. The new Federal Reserve Chair nominee has not been officially announced, but market expectations are shifting. Kevin Warsh, a former Fed governor perceived as hawkish, has emerged as a frontrunner, influencing market expectations for future interest rate cuts. Furthermore, the US Supreme Court has yet to rule on the legality of US global tariffs. Should tariff authority be constrained, attention may turn to alternative measures such as "Section 232" actions.
Third, silver, due to its industrial attributes and recent trading risk control measures, has primarily been oscillating at high levels, with its upward momentum pausing temporarily. After the gold-silver ratio quickly fell below 50, there is some potential for an upward correction. In the short term, silver's price movement can be monitored through fund sentiment, while its medium to long-term macro and micro fundamentals remain intact.
Overall, recent events concerning Greenland and other geopolitical issues have made global competition and confrontation more apparent, further strengthening the market's "de-dollarization" narrative. However, caution is warranted regarding the potential for high-level price volatility in precious metals due to short-term macroeconomic and geopolitical uncertainties. Investors should be wary of "TACO" trade risks and exercise prudence when adding long positions, although the long-term strategy of maintaining a bullish allocation has not significantly changed.
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