Precious metals rebuild as macro tailwinds return, but gold awaits breakout confirmation

Silver has participated in the recovery, climbing back towards USD 80 after bottoming near USD 61 on 23 March. While gold’s rebound has been primarily macro-driven, silver has enjoyed additional support from its industrial linkage. The recent improvement in copper and broader industrial metals, partly driven by reduced growth concerns as geopolitical tensions show tentative signs of easing, has provided an extra tailwind.

That said, from a structural perspective, silver remains in a rebuilding phase. The sharp correction seen during the March liquidity and inflation shock exposed how sensitive the metal is to shifts in both macro conditions and industrial demand expectations. While the rebound is notable, further gains are needed before confidence can be considered fully restored.

Positioning continues to play an important role. Hedge funds have reduced their net long gold futures position to a 25-month low in the latest reporting week to 7 April. The last time positioning was this light, gold traded near USD 2,000/oz, highlighting the scale of the recent reduction in exposure. Profit-taking following a strong multi-month rally, combined with elevated volatility and uncertainty around the Federal Reserve’s next move, contributed to this sharp decline in participation.

From a forward-looking perspective, however, this leaves the market in a less crowded state. Lean positioning reduces the risk of further long liquidation and instead creates scope for renewed buying should the technical outlook improve and macro conditions remain supportive.

As with most markets, developments in the Middle East continue to act as a key macro driver. While heightened tensions initially supported safe-haven demand, the recent stabilisation has shifted the focus. A potential de-escalation could ultimately prove supportive for precious metals if it leads to a weaker dollar and a renewed focus on underlying US fundamentals.

These include persistent concerns around growth and fiscal sustainability, both of which have been exacerbated by the recent conflict. Increased debt issuance alongside higher input costs risks weighing on investment, compressing margins and eroding consumer demand—factors that may, over time, reinforce the case for lower real yields and a more supportive environment for gold.

In the near term, gold remains firmly range-bound, while silver continues its recovery alongside improving industrial sentiment. However, the underlying backdrop has shifted in a more constructive direction. Lower real yields, a softer dollar, renewed rate-cut expectations and very light speculative positioning collectively point towards a market that is rebuilding rather than breaking down.

The absence of a breakout signal for now suggests patience is required. However, the longer this consolidation persists, the greater the likelihood that the eventual move will resolve higher, particularly if macro tailwinds continue to strengthen.