The Shanghai Gold Exchange (SGE) issued its sixth risk advisory of 2024 on June 9, urging investors to exercise caution amid heightened market volatility. The warning coincided with a 1% drop in both spot and futures gold prices, revealing growing market tensions as traders position for potential disruptions from ongoing US-China negotiations in London.
Exchange Sounds Alarm Amid Turbulent Trading Conditions
SGE’s latest notice emphasized “intensifying unstable factors” driving wild swings in precious metals prices. The advisory follows three April warnings when gold briefly hit a record $3,500/oz intraday. While prices stabilized around $3,300/oz in May following US-China trade talks, recent CFTC data shows speculators have dramatically increased net-long positions in both gold (+13,000 contracts) and silver (+11,900 contracts) as of June 3.
This speculative surge contrasts with ETF outflows – global gold ETFs shed 19.1 tonnes ($1.83B) in May, including Asia’s first net withdrawals since November 2024. China’s central bank bucked the trend, adding 60,000 ounces to its reserves for a seventh consecutive month.
Silver and Platinum Outperform in Catch-Up Rally
While gold dominates headlines, other precious metals are gaining momentum. Platinum prices broke through $1,200/oz (up 34% YTD) as silver hit $36/oz – a 13-year high with 25% annual gains. The white metal’s supply crunch (global production fell 2% to 25,000 tonnes in 2024) has driven LBMA inventories down 45% over three years to just five months of industrial demand coverage.
Analysts note the gold/silver ratio at 11.2 remains historically low, suggesting further upside. “Silver’s dual industrial/precious metal characteristics and concentrated positioning make it particularly sensitive to shifts in investment demand,” noted Zheshang Securities, highlighting potential catalysts like central bank diversification.
Structural Drivers Keep Gold’s Bull Case Intact
Citi analysts warn pending US tax reforms could exacerbate fiscal deficits, reinforcing gold’s hedge appeal. Zhongjin Securities’ Guo Zhaohui attributes gold’s resilience to “macro policy uncertainty trade,” noting $3,500/oz records could be retested with unexpected economic shocks or geopolitical escalations.
As markets await clarity from US-China negotiations, the precious metals complex appears at an inflection point – with silver’s breakout potentially signaling the next phase of a broader commodities rally fueled by monetary and geopolitical uncertainties.
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