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


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research 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. To the extent that any content is construed as investment research, you must note and accept that the 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 under relevant laws.

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

Saxo Bank (Schweiz) AG
The Circle 38

Contact Saxo

Select region


All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law.

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.