Metals have fallen victim to their own success. At the beginning of the war, investors rightly questioned why these precious safe havens had not returned to their previous highs.
Historically, war creates strong demand for metals; they are not only needed for military equipment but are also sought after as a hedge against rising uncertainty in risk assets and general supply shocks.
However, this time is different. Markets did not experience a flight-to-safety trend during the war, as military operations did not escalate to the extent that would require such a shift. Instead, the largest concerns quickly shifted to the militarized rise in petroleum prices.
When market participants fail to see what they want to see, and the fundamentals shift unexpectedly, it can result in significant outflows from the metals asset class.
The last session intensified the pre-FOMC decline in gold, silver, and other precious metals, alongside equities and bonds.
The asset class now faces a potential major transformation compared to the strictly bullish trends seen at the end of 2024 and into 2025.
With this morning’s shy attempt of a rebound, let’s explore this shift in a daily timeframe analysis of Gold (XAU/USD) and Silver (XAG/USD) to identify if the previous session’s drop provides an opportunity for late trend joiners, or a trap.
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