Global precious metals markets witnessed a significant decline on Monday, with silver prices falling below $80 an ounce, relinquishing earlier gains, and gold also dropping considerably from its record highs. This shift in price trends was driven by heavy profit-taking by investors, coinciding with a decrease in demand for safe-haven assets due to optimism surrounding the easing of global geopolitical tensions.
Details of gold and silver trading
In more detail, spot gold fell 0.4% to $4,512.74 an ounce, after hitting an all-time high of $4,549.71 last Friday. Futures contracts were not immune to this decline, with U.S. gold futures for February delivery dropping 0.4% to $4,536.40 an ounce.
As for the white metal, it witnessed sharp fluctuations, with the price of silver in spot transactions declining by 1.3% to settle at $78.12 per ounce, after having recorded its highest level ever at $83.62 earlier in the same session, reflecting a state of rapid fluctuation in investors’ decisions.
The impact of geopolitical factors on safe havens
Economic analysts directly link this decline to recent political developments. In this context, Tim Waterer, chief market analyst at KCM Trade, explained that the market is experiencing a combination of natural profit-taking after record highs, as well as positive reactions to the seemingly fruitful talks between US President Donald Trump and Ukrainian President Volodymyr Zelensky.
Precious metals, particularly gold, are traditionally considered a safe haven for investors during times of war, crisis, and political uncertainty. However, with President Trump's remarks on Sunday indicating he was close to reaching an agreement with Zelensky to end the war in Ukraine, risk appetite began to return to the markets, diminishing gold's appeal as a hedge against geopolitical risks.
Economic context and correction movement
From an economic and technical perspective, this decline is considered an expected correction. Markets typically experience selling waves after reaching all-time highs, aimed at converting paper gains into cash – a phenomenon known as "profit-taking." The recent price levels of gold and silver reflect pre-existing concerns about global inflation and ongoing tensions. However, any sign of international political détente usually prompts investors to reassess their portfolios and shift towards higher-yielding assets rather than simply holding metals that do not generate regular returns.
This decline does not necessarily mean the end of the upward cycle for metals, but it represents a break for the indices and an immediate reaction to the positive news coming from the Ukrainian war file, which has long been one of the main drivers of commodity and metal prices around the world.
