Continued pressure on metals from US yields and China weakness Continued pressure on metals from US yields and China weakness Continued pressure on metals from US yields and China weakness

Continued pressure on metals from US yields and China weakness

Ole Hansen

Head of Commodity Strategy

Summary:  Gold and silver, as well as copper, have suffered continued losses in response to central bank rhetoric, most importantly from the US Federal Reserve regarding their resolve to bring down runaway inflation through aggressive rate hikes. Silver meanwhile has slumped to a two-year low as its close correlation with industrial metals, most notably copper, continues. This sector has seen additional pressure in response to China's continued and so far unsuccesful handling of Covid infections via growth killing lockdowns

Gold and silver, as well as copper, have suffered continued losses in response to central bank rhetoric, most importantly from the US Federal Reserve regarding their resolve to bring down runaway inflation through aggressive rate hikes. A development that continues to raise headwinds for investment metals through its impact on the dollar which has jumped 10% against a basket of major currencies this year, while US 10-year real yields have seen their biggest jump in decades, currently up 1.8% in 2022.

Demand for investment metals will likely remain challenged until we see the dollar and bond yields stabilizing, perhaps not until a deteriorating economic outlook forces a rethink or inflation fails to fall at the pace currently projected by the market. Since Federal Reserve Chairman Powell’s hawkish speech at Jackson Hole last Friday, forward inflation expectations have declined further with the inflation swaps out to five years now all pointing to inflation below 3%. 

In a recent update, titled “Core inflation is unofficially dead” my colleague Peter Garnry highlighted why elevated food and energy prices will support higher than expected inflation for longer with climate change and the green transformation being inflationary in the years to come. A development that leads us to believe that in an inflationary environment the tangible world, which includes commodities, must increase dramatically, so investors should invest in the tangible world to offset the inflation risk in order to preserve wealth in real terms.

Source: Saxo Group

Gold’s ability to act as a diversifier has increasingly been called into question with the latest decline to near the key support area around $1680/oz. Once again, however, it is worth highlighting that gold, except for XAUUSD which has been troubled by the mentioned 10%-dollar rally, continues to do better than under pressure stocks and bonds. XAUEUR trades up 13% year-to-date compared with a 17% loss on EuroStoxx 50 index while the 6% loss in XAUUSD compares favorably with the 17% loss in the S&P 500 and 25% drop in long end bonds.

Looking ahead we see no reason to change our long-term bullish view on gold with support potentially coming from the risk of a policy mistake sending US economic growth, the dollar and bond yields lower. In addition, the physical market is likely to respond to lower prices by seeing a pickup in demand, while positions in the futures market held by speculators and in ETFs by long-term focused investors remain relatively light. 

Total holdings in bullion-backed ETFs have by now declined 7.2 million ounces from the April peak to 99.9 million ounces, some 2.2 million ounces above the December low. Hedge funds, typically operating in the futures market due to its leverage nature, held a modest net long of 30k contracts or 3 million ouncesin the latest reporting week to August 23, some 75% below the five-year average. Additional negative price momentum could see the position switch to a net short for only the second time since April 2020, a development that lifts the possibility of a strong rebound once the technical and fundamental outlooks turn more favorable towards the investment metal sector. 

Silver has seen the biggest decline, and at $17.70 it has reached a two-year low, down around 23% on the year. Silver has not only been challenged by the weakness mentioned in gold but also, and more importantly, by China weakness related selling across industrial metals, especially copper which trades down 22% on the year. The rout in silver and copper, as well as zinc and aluminum, two metals that recently found support from smelters reducing capacity due to high energy costs, has by now reached the capitulation stage with silver having entered a previous consolidation range between $16.50 and 18.50. Speculators, according to our weekly COT update, already hold net short positions in both metals, and it would require a change in the technical and/or fundamental outlook to turn those short positions into a tailwind through short covering.

The gold-silver ratio, last at 96 (ounces of silver per ounce of gold)has retraced more than 50% of the 2020 to 2021 collapse from 127 to 62 with the next level of resistance around 102.5, a potential further 6% underperformance relative to gold, while a break back below 94 would be the first signal of strength starting to come back.

Source: Saxo Group
Gold is once again challenging key support around $1680, an area that has provided support on several occasions during the past two years. A breakout would sour sentiment further and challenge investors with a long-term view on the metal. At this stage the price needs to break above the trendline from the Mach peak, currently at $1770 before signalling a recovery.

For a more in-depth technical analysis of gold, silver, gold-silver ratio and copper please follow Kim Cramer Larsson on Twitter here
Source: Saxo Group

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (
- Analysis Disclaimer (
- Notification on Non-Independent Investment Research (

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000

Contact Saxo

Select region


The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.