The recent decline in gold and silver prices has left market analysts searching for answers, but no clear trigger has emerged. The Wall Street Journal has a good rundown on this unexpected turn. We asked Kathleen Brooks, research director at forex broker XTB, for her take on what’s behind the yuan slide. She thinks that as a result of stretched valuations, a selloff of precious metals is occurring. Further, she notes that there are early indications that the U.S. CPI data will be softer than forecasted.
Although the drop has alarmed many, Brooks makes it clear that doesn’t mean bad news for investors, necessarily. She describes slide as an indication of prudence on the part of market participants. All this implies they are steering clear of rosy scenario-izing. This moderation indicates that gold’s frenzy has hit a ceiling. This might point to a nice market correction.
Brooks’ analysis highlights the decades of history of intervention, especially by central banks and bullion banks, to suppress gold prices. These institutions often engage in buying and selling to defend their currencies against market forces, but details about their actions typically remain underreported. In recent years, derivatives have been used more and more as interventions themselves. This change gives greater precision in controlling the market’s ups and downs.
Brooks and other analysts make enlightening contributions about gold, its connections to gatekeeping institutions. When it comes to the subject, most of the financial media are reluctant to ask any tough questions. The lack of scrutiny leaves many aspects of the gold market obscured, particularly the connections between central banks, bullion banks, and their daily market activities.
Indeed, market analysts have been scrambling to find explanations for why gold and silver prices have fallen. They know that it’s a moving target. The probability of softer U.S. CPI data adds a new wrinkle of uncertainty to an already complicated debate. Analysts are anxious to see how these economic indicators will play out. They are seeking to know if their actions will increase or reduce the value of precious metals.