Weakened demand
Weak demand in key regions such as China and India is threatening gold's rally, while silver continues to perform poorly than gold and faces the risk of falling further, according to precious metals analysts at Heraeus.
According to the latest report from this analysis team, gold's rally is facing obstacles as demand in key markets is declining.
Indias gold imports in February are on track to hit a 20-year low, while Chinas gold imports via Hong Kong (China) in January fell 44% compared to the previous month the weakest level since April 2022.
After setting a new record high of 40 in 2024 and increasing by 10% since the beginning of the year, gold's rally may be under pressure from weak consumer demand in these two largest markets," they wrote.
Over the past two weeks, gold has been trading at a discount in China and in India since early January. Jury demand also decreased compared to the same period in 2024, down 24% in China and 2% in India.
With gold prices at a record high, the volume of gold purchased could continue to decline, even if total spending remains unchanged, which means that demand for gold in the first quarter of 2025 in India is likely to be lower than the 139 tons recorded in the first quarter of 2024 - precious metals analysts at Heraeus commented.
Technically, the gold price chart is also showing signs of overbought, and last week's price movements have reinforced this view. After setting a new high on Monday, gold turned to decline to $2,917/ounce.
The pressure increased sharply on Thursday when US President Donald Trump announced new tariffs on Mexico, Canada and China goods, causing the USD index to increase by 1.7 percentage points to 107.2. Gold closed the week at $2,849 an ounce, leaving a downward candle pattern on the weekly chart, the analysis team said.
Gold prices remained in a positive range on Monday but fell from a high of over $2,890/ounce. The latest spot gold price was at 2,884.42 USD/ounce, up 0.92% in the session.
Silver is still inferior to gold, at risk of falling further
According to Heraeus, silver continues to be stuck in the shadow of gold and prices could plummet if gold weakens.
Siliver will perform better than gold in 2024, and this gap is widening in 2025, they wrote. Last week, silver fell 3.1%, stronger than golds 2.1% decline. Although strong industrial demand especially from solar the metal has gained just under 7% since the start of the year, still below golds 10% gain.
Analysts believe that silver's weakening could increase if gold enters a prolonged correction period. Gold/ silver ratio has remained above 90 for five consecutive days - a rare thing. Since 2020, only May 2022 has recorded a longer period, lasting 19 days, they said.
After many failures in trying to break above 13,800 USD, silver has begun to return some of its increase on Monday but is still in the green zone. At the time of writing, the spot silver price was at 31.556 USD/ounce, up 1.3% on the day.
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