Metals update: Lunar New Year lull exposes reliance on Asian demand

Key Points:

• Gold, silver and copper have started the Lunar New Year week under pressure, with much of Asia — and crucially China — closed, underscoring how heavily the recent rally relied on Asian participation
• The dollar’s weakness in recent months has supported hard assets, but positioning has become increasingly one-sided, with a recent survey shows fund managers holding their most bearish dollar stance in a decade. 
• Gold has so far found support near USD 4,860, highlighting the metal’s resilience despite thin liquidity but also fading momentum following the extreme volatility seen in recent weeks.
• In silver, the latest rebound has produced two lower highs, signalling fading conviction among buyers, while copper may struggle until inventories stop rising and physical tightness re-emerges.

Gold, silver and copper have started the Lunar New Year week under pressure, with much of Asia — and crucially China — closed. The subdued trading environment has amplified price moves while underscoring how heavily the recent rally relied on Asian participation. January’s parabolic advance, driven by strong regional demand and investor flows, was followed by an equally historic correction. With the marginal buyer temporarily absent, metals are now struggling to regain momentum.

At the same time, traditional safe-haven dynamics have been muted. Middle East tensions have not delivered a sustained bid, while lower Japanese government bond yields — reflecting reduced expectations for further rate hikes — weighed on precious metals in Asian trade. Currency dynamics also remain central: a broadly firm dollar in thin conditions has added pressure just as positioning data suggests the greenback may be vulnerable to a counter-trend rebound. 

Dollar positioning adds two-way risk

Currency dynamics remain a critical driver for metals. The dollar’s weakness in recent months has supported hard assets, but positioning has become increasingly one-sided. Bank of America’s latest FX sentiment survey shows fund managers holding their most bearish dollar stance in a decade. Such consensus does not guarantee a reversal, but it raises the risk of a counter-trend rebound.

Notably, outside USDJPY, the dollar has struggled to extend its decline. If EURUSD were to break below 1.18 or GBPUSD below 1.35, short positioning could start to unwind adding some additional headwinds.

Why the bullish outlook for gold remains intact

Despite short-term softness, the structural drivers supporting gold remain firmly in place in our opinion. Persistent central bank reserve diversification continues to underpin structural buying, while expanding fiscal deficits and elevated sovereign debt levels reinforce gold’s role as a store of value amid currency debasement concerns. At the same time, ongoing geopolitical fragmentation sustains long-term demand even when not immediately reflected in price, and continued portfolio diversification away from dollar-centric assets supports strategic allocations. Together, these forces suggest that, although corrections are inevitable after parabolic advances, the broader bull trend remains intact.

Gold has so far found support near USD 4,860, with the next technical level emerging around USD 4,670. The metal’s resilience despite thin liquidity suggests underlying demand remains intact, but momentum has clearly faded following the extreme volatility seen in recent weeks.

Silver: supportive fundamentals, near-term headwinds

Silver’s long-term fundamentals remain supportive, particularly given its dual role in monetary demand and solar photovoltaic expansion. For 2026, the Silver Institute forecasts a sixth consecutive annual structural deficit of around 67 million ounces, down from 95 million in 2025. Although total supply is rising toward decade‑high levels, it remains insufficient to fully meet the current surge in investment demand.

Looking ahead, the supply‑demand balance may begin to shift. Elevated prices risk curbing industrial and jewellery consumption, while rising scrap supply — with recycling volumes reaching their highest levels in more than a decade — could gradually ease market tightness. The impact of these potentially price‑stabilising developments will only become evident in the coming months. Until then, the tight supply narrative is likely to continue attracting investors to the white metal in search of additional gains.

From a technical perspective, the latest rebound has produced two lower highs, signalling fading conviction among buyers. After outperforming during the rally phase, silver bore the brunt of the correction and is still digesting that volatility shock. With Chinese activity temporarily paused and industrial demand signals mixed, the metal may require a period of consolidation before a more durable recovery can take hold, even if the broader supply‑demand balance remains tight.

Copper: long-term scarcity narrative meets near-term oversupply

Copper has also seen a sizeable correction with the High Grade contract trading back below USD 5.80 per pound after surging to a record USD 6.58 last month. The decline is being driven primarily by long liquidation amid a sustained build in exchange-monitored stockpiles, which have now surpassed one million tons for the first time since 2003.

This surge in visible inventories highlights the disconnect between copper’s long-term bullish narrative and current supply conditions. Activity typically slows ahead of the Lunar New Year before accelerating in early March. This year, however, the market enters the post-holiday period with ample supply, suggesting prices may remain under pressure until demand visibly improves. Market focus is therefore shifting toward post-holiday Chinese activity. Inventories often peak before prices stabilise, making stock trends a key signal to watch in coming weeks. 

Copper’s structural outlook remains supported by the global energy transition and electrification trends. Expanding power grids, renewable energy infrastructure, electric vehicles and data-center power demand continue to underpin long-term consumption growth. However, commodities differ from equities: prices respond to current supply-demand balances, not future narratives. Until inventories stop rising and physical tightness re-emerges, rallies may struggle to gain traction.

Outlook: waiting for liquidity and demand to return

The Lunar New Year pause has exposed how dependent recent price strength was on Asian participation. In the near term, metals may remain sensitive to currency moves and liquidity conditions. A crowded short-dollar trade adds an additional risk factor that could generate volatility.

Over the medium term, the structural bull case for gold and copper remains intact, supported by macroeconomic, geopolitical and energy-transition dynamics. Silver’s outlook remains constructive but tactically less convincing following recent volatility. 

With Chinese markets set to reopen in the coming weeks, the return of speculative and not least physical demand and industrial activity will be critical in determining whether the current consolidation phase evolves into renewed strength — or a deeper reset designed to attract fresh buyers.