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International prices for gold and silver soared to historic highs before experiencing a broad decline on the last trading day, prompting analysts to caution about potential short-term volatility risks.
On October 17, the spot gold price in London hit a peak of $4,379.38 per ounce and then closed lower by 1.8%, settling at $4,247.17. Similarly, silver prices reached an intraday high of $54.44 per ounce, only to close 4.1% lower at $51.87.
The rally in precious metals during October was driven by several factors, according to Gu Fengda, chief analyst at Guosen Futures. From a macroeconomic standpoint, expectations that the Federal Reserve will cut interest rates have played a significant role. These expectations have led to a weaker US dollar and lower real interest rates, both of which boost gold’s attractiveness as a non-yielding asset.
Additionally, increased geopolitical uncertainties have sustained strong safe-haven buying, while ongoing inflows from central reserves and institutional investors have helped solidify demand.
Supply constraints are also key to understanding the price movements, explained Xia Yingying, a precious metals analyst at Nanhua Futures. “Producing precious metals requires substantial investment and long development timelines, which limit the ability to quickly increase output,” he said. “Silver, mainly produced as a by-product, has even less flexibility in supply than gold, making its prices highly sensitive to shifts in demand.”
Rising sovereign debt levels in the US and other countries, along with recent concerns over the Federal Reserve’s independence, have fueled fears of worsening deficits and further currency devaluation, prompting investors to turn to precious metals, said Wu Zijie, a research analyst at JRJ Futures.
Xia emphasized the importance of caution, warning that elevated prices and heightened volatility necessitate careful risk management and advise against chasing after rapid price increases.
While medium- to long-term bullish prospects are still considered valid, Gu pointed out that short-term volatility risks have grown significantly. He recommended that investors keep their positions light, use price corrections as opportunities for gradual accumulation, and implement strict risk controls, avoiding making entries at high price levels.
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