"The new record before the steep decline in the precious metal came as investors piled into safe-haven assets amid stubborn inflation in major economies and geopolitical tensions over US-China trade ties, US President Donald Trump's Greenland ambitions, Russia's war in Ukraine and Iran's role in regional conflicts. Financial markets also reacted to expectations of imminent interest cuts by the US Federal Reserve."
"Another force driving prices higher was a wave of buying of call options contracts that give traders the right to buy financial products like gold at a set price in the future. This forced option sellers to buy the metal itself to hedge against possible losses, creating a loop that pushed prices even higher. Silver, meanwhile, staged an unexpected rally of its own last week, hitting a record $121.64 per ounce on Thursday before plunging by nearly a third shortly after."
Gold surged to a record above $5,580 per ounce and then experienced its steepest one-day decline in years, dropping about 9% and falling a further 3.3% to $4,545. Investors had bought safe-haven assets amid persistent inflation, US-China trade tensions, geopolitical events and expectations of imminent US Federal Reserve rate cuts, which typically weaken the dollar and lift gold. A wave of call-option buying forced sellers to acquire physical metal to hedge, amplifying the rally. Silver surged to a record $121.64 before collapsing roughly 41% to near $72, driven by speculative trading, industrial demand expectations and tight domestic supply in China. The abrupt reversal stemmed mainly from two announcements that flipped sentiment and triggered widespread forced selling.
Read at www.dw.com
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