Gold and silver prices have suffered their steepest declines in 12 years. Investors have decided that previous gains have made the precious metals overvalued and have begun selling their assets in droves. This is reported by Bloomberg.
Gold fell 6.3% to $4,150 an ounce, its biggest one-day drop in more than 12 years. Silver lost even more, down 8.7%. At the same time, the quotes of leading gold mining companies fell sharply: shares of Barrick Mining, Newmont and Agnico Eagle Mines fell by more than 8% on the morning of October 22.
The collapse in prices stopped the rapid growth that only a week ago had raised gold and silver to historical highs. At that time, the metals were rising against the background of expectations that the US Federal Reserve would lower interest rates by the end of the year, as well as due to a decrease in confidence in government bonds and currencies.
Investors increasingly actively invested in precious metals, fearing a decline in the dollar and a growing US budget deficit. Gold was seen as a means of protection against political and economic risks. The market has been worried about bloated deficits, pressure on the independence of central banks and unpredictable economic policies, which is particularly acute in the United States.
Many investors are turning away from American assets amid political instability during the presidency of Donald Trump and after the passage of the Republican tax and spending bill, which is expected to increase the national debt to more than $ 40 trillion.
Additional pressure on gold was caused by reports of a possible resumption of trade talks between the United States and China after several weeks of mutual threats. Also affected were the technical overbought market and a strengthening dollar. Investors took the prospect of negotiations as a signal of a potential reduction in global risks, and therefore a reduced need for a “safe haven” in the form of gold and silver.
As a reminder, since the beginning of the year, gold has risen in price by more than 65% – this was facilitated by geopolitical tension, active purchases by central banks, and the dedollarization process.
