On July 25th, the spot prices of gold and silver suddenly plunged, with the latter dropping over 5% and hitting a daily low of $27.63 per ounce. Meanwhile, the former experienced a decline of over 2%. Some analysts pointed out that the uncertain prospects of the upcoming US election have weakened the 'Trump trade' that investors have bet on. This has put the market into a highly competitive and risky period, with an increased aversion to risk among participants dragging down the prices of gold and silver.

In addition, overnight collapse of the US stock market also hit the sentiment of many investors. The Cboe Volatility Index (VIX), also known as the 'fear index,' surged to 18.46 overnight, reaching a new high since the end of April. Data from Trade Alert showed that the turnover ratio of VIX options on Tuesday was almost twice that of normal days.

Meanwhile, the international copper price has also suffered a sharp decline and is currently at a low point that has lasted for over three months. It has fallen by almost 20% compared to its historical high of $11,100 per tonne in May. With increased uncertainty about global economic recovery, Goldman Sachs analyst Adam Gillard has warned that the situation will continue to deteriorate. This is an oversupplied market, and copper prices are expected to fall in the short term.

Big dive

On July 25th, the spot prices of gold and silver suddenly plunged with the latter dropping over 5% and hitting a daily low of $27.63 per ounce, while the former saw a decline of over 2% and closed at $2,372.90 per ounce.

Affected by the decline in international precious metal prices, the domestic futures market has also been adjusted on July 25th. At the close of trading that day, the main silver contract in Shanghai fell 5.3%, reaching a low point for more than two and a half months, while the main gold contract (2410) plummeted 1.95%, closing at 555.68 yuan/gram.

Recently, the COMEX gold price has risen to $2,488.4 per ounce, hitting a new historical high. The price of gold has since seen a rapid adjustment due to the realization of phased bullishness and the exit of profit-taking.

At present, market funds have already reflected the expectation of a rate cut by the Federal Reserve in advance. The sudden change in the American election is also one of the reasons affecting the trend of precious metal prices.

Some analysts pointed out that the uncertain prospects of the upcoming US election have weakened the 'Trump trade' that investors have bet on. This has put the market into a highly competitive and risky period, with an increased aversion to risk among participants dragging down the prices of gold and silver.

As for the recent weak performance of precious metals, Zhang Dapeng, the director of non-ferrous metal research and senior precious metal researcher at Guotai Junan Futures, attributed it to the manufacturing Purchasing Managers' Index (PMI) in the US falling into contraction zone in July, hitting a seven-month low and lower than expected. The services PMI and comprehensive PMI were better than expected and the figures from the previous month, both reaching a two-year high.

He also stated that after gold hit a new historical high for the third time, it underwent a rapid adjustment, which raised market concerns about the pressure above. Given the current complexity of the macro environment, investors should be vigilant to the possibility of gold prices returning to the range-bound weak trend.

Guosen Futures stated that although the 'Trump trade' has cooled down somewhat, market reactions to policies proposed by Harris have been cautious, mainly because of increased uncertainty and wait-and-see sentiment among participants regarding her chances of winning the election. Specifically, with Biden out of the race, the US dollar may continue to fluctuate within a range. Due to increased political uncertainty, gold and US Treasury bonds may continue to be sought after by investors for hedging purposes.

Looking ahead, Guosen Futures believes that the cooling of the 'Trump trade' caused by Biden's exit and the increase in political uncertainty will lead to a resurgence of risk aversion, which may drive the upward movement of gold prices again. However, since macroeconomic sentiment has fluctuated, and the previous bullishness of gold and silver has led to profit-taking, investors should be cautious to avoid further market volatility.

In addition, the overnight crash in the US stock market also hit the sentiments of many investors. The Cboe Volatility Index (VIX) surged to 18.46 overnight, reaching a new high since the end of April. Data from Trade Alert showed that the turnover ratio of VIX options on Tuesday was almost twice that of normal days.

Copper has also taken a nosedive.

Meanwhile, the international copper price has also suffered a sharp decline and is currently at a low point that has lasted for over three months. It has fallen by almost 20% compared to its historical high of $11,100 per tonne in May. At the time of writing, London copper was quoted at $9,022 per tonne, falling almost 1% on the day.

Domestic copper prices have also continued to decline. On Thursday, Shanghai copper hit a new low and created the longest run of declining prices in history. The main contract of Shanghai Futures Exchange Copper fell 2.42%, closing at 73,030.0 yuan/ton.

Against the backdrop of global clean energy transformation, the market generally believes that global copper demand is high, and the copper market is expected to experience shortages in the coming years, which is the main driving force for the sustained rise in copper prices.

With increasing uncertainty about the global economic recovery, the talk of "copper shortages" has begun to waver. Goldman Sachs analyst Adam Gillard has issued a warning that the situation is deteriorating and that this is an oversupplied market, which will push copper prices down in the short term.

Jinrui Futures analyst Gong Ming commented, "Concerns about global economic growth still exist, which may push copper prices further down."

Zhan Dapeng believes that the decline in copper prices has stimulated downstream demand for inventory replenishment, but disagreement is also increasing, with some enterprises still having a bearish attitude, which is restricting the recovery of orders. Although the Democratic Party's support rate is rebounding, the uncertainty of the election still suppresses market performance, and the weak trend of copper prices continues. It is suggested that the short-term copper price should be treated with caution, but it is no longer appropriate to go short. Pay attention to whether next week's Fed interest rate meeting will become a turning point in sentiment.

On the evening of July 25th Beijing time, the latest real GDP and initial PCE price index for the second quarter will be released in the United States, and the latest first-time unemployment claims will be published, which will further reveal the operation of the US economy.

Editor/Emily