Selling pressure pulls gold prices down sharply but medium-term room remains

Gold and silver prices are under strong adjustment pressure in the context of volatile global financial markets, causing cash demand to increase. However, according to Ole Hansen - Head of Commodity Strategy at Saxo Bank, gold's outlook may soon improve again when the technical sell-off wave ends.

According to analysis from this expert, the precious metal's price decrease is mainly due to investors needing cash to balance their portfolios, rather than due to changes in fundamentals. In a period of strong market volatility, gold - an asset that has maintained an increase for a long time - has become an easy option to sell to recover capital.

Mr. Hansen said that geopolitical tensions in recent times have created a spillover shock to the energy market, thereby affecting inflation, cost of capital and global growth prospects. These factors force investors to adjust expectations for interest rates and liquidity.

Notably, bond yields increased sharply, in which US government bond yields for the 2-year term exceeded the operating interest rate for the first time in many years, increasing the possibility that monetary policy may maintain a tightening state longer than expected.

In that context, gold returned to the 200-day moving average, reflecting a significant scale of adjustment after a prolonged increase streak since 2023. Selling pressure mainly comes from profit-taking, loss-cutting and releasing of previous buy positions.

Silver is even more strongly affected due to its sensitivity to economic cycles. Silver prices have fallen sharply after breaking important technical support levels, showing that correction risks are still present in the short term.

However, in the long term, the upward trend of precious metals is still maintained. In one year, gold prices still increased by more than 38%, while silver increased by about 90%, reflecting the strong attraction of this asset group before.

Mr. Hansen said that as technical selling pressure gradually decreases, gold supporting factors may quickly return. Prolonged inflation risk, high energy costs and increased public debt pressure may cause demand for holding gold as a risk hedging asset to continue to increase.

For silver, recovery prospects may still appear, but in the short term, this metal is likely to still be affected by global economic growth prospects.

At the time of writing the article (1:04 AM on March 25 - Vietnam time), spot gold prices fluctuated around 4:385.8 USD/ounce, while silver traded around 69.19 USD/ounce, showing that the market is still in a period of fluctuation and adjustment.