The gold price dropped below $4,000 an ounce for the first time since November, and silver tumbled toward six-month lows, as a stronger dollar and a tougher US central bank drained the air out of a three-year boom in precious metals. For three years, gold did almost nothing but rise, more than doubling as central banks, fund managers and ordinary savers all crowded into the same trade. This week that long climb stalled hard. The scale of the run is what makes the fall so
jarring. Gold had posted double-digit gains in each of the last three years, and silver had at one point this year quadrupled from where it traded twelve months earlier. On June 24, gold slipped under the $4,000 mark for the first time in seven months, closing near $3,970 after a fall of about 3.5%. Silver, which had soared even faster, tumbled about 5% to around $58 an ounce, sitting at its lowest level in roughly half a year. Silver tends to fall harder than gold
in a selloff because it is a smaller, thinner market and doubles as an industrial metal. When growth fears rise alongside a stronger dollar, both sides of silver’s appeal weaken at once. For a reader far from the trading floor, the point is simple. The metals that everyone reached for when the world felt risky are suddenly the ones being sold, and the reasons say a lot about where money thinks the world is heading. Why the gold price is falling now The biggest weight
is the US central bank, the Federal Reserve. Under its new chair, Kevin Warsh, it has signalled it is more likely to raise interest rates than cut them, a stance that makes safe, interest-bearing dollars more attractive than metals that pay nothing. A firmer outlook for rates has pushed the dollar to multi-month highs. Because gold and silver are priced in dollars, a stronger currency makes them costlier for foreign buyers and tends to drag their prices down. The charts are flashing warnings too. Gold
is closing in on a “death cross,” a pattern in which the 50-day average price slips below the 200-day line, which traders read as a sign the trend has turned down. A second force is fading fear. An interim peace agreement between the United States and Iran has calmed energy markets and reopened shipping through the Strait of Hormuz, easing the war-risk premium that had earlier sent investors rushing into gold. How the gold price slump spread to stocks There was a third, more mechanical
trigger. A sharp drop in US technology shares left some investors nursing losses, and they sold gold to raise cash and cover them, a pattern that turns a stock slide into a metals slide. That is why a single bad day can hit assets that usually move apart. When everyone has crowded into the same winning trades, the rush for the exit tends to drag everything down together. What it means for Latin America The pain lands squarely on the region’s miners. Mexico is the
world’s biggest silver producer, and its flagship, Fresnillo, owned by the industrial group Industrias Peñoles, had seen its shares balloon as silver soared; the reversal has whipsawed the stock, with sharp single-day drops on the worst selloff days. Peru, another of the world’s top silver and gold producers, has the same exposure, since the metals are major export earners whose price feeds straight into government revenue and the value of mining companies. Yet most analysts frame this as a correction rather than a crash. Silver
still faces a sixth straight year of more demand than supply, a structural shortage that gives the metal a floor even as the speculative froth comes off. Gold has a similar underpinning. The world’s central banks have spent the past few years buying bullion in record amounts to diversify away from the dollar, and that steady official demand is unlikely to vanish because of one bad week in the market. Frequently Asked Questions Why is the gold price falling? A hawkish US Federal Reserve and
a stronger dollar have made interest-bearing assets more attractive than gold, which pays nothing. A US-Iran peace deal also eased the war fears that had earlier driven safe-haven buying. How low did gold and silver go? Gold fell below $4,000 an ounce on June 24, closing near $3,970, its first time there since November, while silver slid about 5% to around $58, a six-month low. Both followed an exceptional multi-year run that had roughly doubled gold’s price. Which Latin American companies are affected? Mexican silver
giant Fresnillo, part of Industrias Peñoles, is the most exposed, alongside other miners in Mexico and Peru. Lower metal prices squeeze their revenue and have driven sharp swings in their share prices.
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