In recent months, gold has emerged as a focal point in global financial discussionsHowever, as of June 19, this once soaring asset has entered a choppy phase, with the gold index experiencing a 1.22% decline since June beganIn tandem, the non-ferrous metals index has suffered an even larger drop of 5.6%. The dynamic movements in gold prices and mining shares have led to increased scrutiny by analysts and investors alike, raising questions about the underlying factors driving these changes.

Liu Tingyu, the manager of the Everwin Gold Stock ETF, shared insights with reporters regarding the notable retreat in gold pricesHe identified three primary reasons for this adjustmentFirstly, the Chinese central bank announced on June 7 that its gold reserves had not increased at the end of May, remaining the same as at the end of AprilThis unexpected stagnation raised eyebrows in the market

Secondly, on the same day, the U.Sposted dramatically better-than-expected non-farm employment data, which shifted market expectations, pushing back the anticipated timing for interest rate cutsLastly, the U.SFederal Reserve's June meeting concluded with a hawkish tone, with the latest "dot plot" reducing the forecast for rate cuts down to just one this year.

Delving into the performance of other non-ferrous metals, Liu attributed their recent declines to the Fed's diminished expectation of rate cuts impacting their finance-related aspectsHe noted that the operating rates in the domestic electrolytic copper and aluminum processing sectors have been declining, signifying an intermittent weakening in demandThis contraction in the supply-demand gap has also contributed to the downturn in industrial metals.

After the Dragon Boat Festival, international gold prices saw a sharp decline

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According to data from Wind, gold fell from $2360.6 per ounce on June 6 to $2310.8 on June 7. The last day of the holiday saw prices plummet further to $2304.4. Following this, gold entered a turbulent state, with a recent slight uptick to $2324.35. The fluctuations in pricing are reflective of broader economic indicatorsThe U.Sreported a significant increase in non-farm payrolls for May, totaling 272,000 jobs, vastly overshooting the forecast of 180,000. The ISM non-manufacturing index stood at 53.8, well above the anticipated 51, further supporting the notion of economic resilience and further cementing the dollar's strength.

Adding to the pressure on gold, the Chinese central bank's unwavering gold reserve figures suggested a pause in their 18-month streak of accumulating goldWhen U.Sjob numbers surpassed expectations, the anticipation of a loosening monetary policy from the Fed was abruptly quelled, leading international gold prices to swiftly breach the $2300 per ounce mark.

Wang Xiang, a manager at Bosera’s gold ETF, remarked on the emerging support for far-right parties in the European Parliament elections, introducing fresh uncertainties into the European economy

As a result, the dollar may experience renewed strength, proving detrimental to commodities, including goldWang also indicated that the more robust-than-expected employment data from the U.Sfirmly placed a lid on near-term rate cut expectations from the Fed, thereby impacting sentiment in the gold market.

In assessing the various factors at play, observers have noted that recent surges in gold prices could have led to profit-taking behavior, causing some degree of correctionThe diminished purchasing pace of gold by the central bank has also played a role in shaping market sentiments, especially given the seasonal lull in physical consumptionFurthermore, there has been an increase in gold inventories at futures exchanges, which, coupled with relatively adequate supply, places additional burdens on gold prices.

Affected by the gold market's performance, other non-ferrous metals have also faced corrections

The first trading day after the Dragon Boat Festival saw notable downturns in the precious metals sector, particularly in silver and goldOn June 11, silver saw a drop of over 6%, while gold fell by 3% in domestic marketsMining stocks in both A-shares and Hong Kong markets largely experienced declines, with notable stocks such as Zhaojin Mining witnessing a drop exceeding 10% and Shandong Gold falling more than 6%.

The interconnectedness of gold and other non-ferrous metals raises intriguing questions about market dynamicsAccording to Liu Tingyu, gold has four core drivers: its monetary property, financial property, safe-haven characteristic, and commodity propertyBoth the monetary and financial attributes are significant influencers of gold's performance, which in turn affect other non-ferrous metalsConsequently, fluctuations in the strength of the dollar and Fed monetary policy resonate throughout both markets, with gold serving both as a barometer and a magnet for investor interest during inflationary periods.

Bi Mengni, a researcher at Geshang Financial, corroborated this observation, noting that when market uncertainties escalate, investors often gravitate toward gold as a safe haven

This transition of capital can diminish investments in riskier assets, including various metalsMoreover, the volatility in gold prices can shape investor expectations in other metals, creating a ripple effect across markets.

Looking ahead, there are mixed forecasts for gold assetsGuotai Fund analysts assert that globally, central banks continue to elevate their gold purchasing trends, likening this behavior to a long-term upward adjustment in gold's pricing centerThe prediction includes factors such as an anticipated global economic downturn, surging demands for gold purchases by central banks, and the trend of de-dollarization globally, suggesting that gold may emerge as a new pricing anchor in the market.

Liu Tingyu expressed optimism regarding investment opportunities in gold following recent declines, noting that the price corrections have further improved the value proposition

Historical patterns show that central bank purchases are often inconsistent with gold price fluctuations, and given that China’s gold reserve percentage remains below international averages, there is still room for growthThis creates a dynamic in which ongoing purchases might still shape gold prices positively in the long term.

Additionally, despite the high job growth figures in the U.S., associated with a marginal increase in unemployment rates, predictive metrics suggest a downward trajectory for inflationThis could lead the Fed to consider rate cuts if inflation cools or unemployment progresses further upward, triggering another growth phase for gold.

Outside of gold, Liu also maintained a buoyant outlook on copper, attributing its steep price hikes to pronounced supply-demand imbalancesThe world’s largest copper supplier experienced a 10.1% reduction in production in March, coupled with declining ore grades and aging mines creating long-term production constraints

Coupled with the critical push toward energy transitions and infrastructure development, the gap between supply and demand could widen, positioning current copper prices as a starting point for future growth.

Bi highlighted that central bank purchases often reflect a desire for risk management and exchange rate stability, and given the current climate, these imperatives are unchangedA halt in buying does not signify an end to upward price trends but rather can indicate a consolidation phaseWith a variety of macroeconomic factors at play, the prospect for gold prices remains firmly optimistic in the medium to long term.

In conclusion, investors are urged to cautiously observe market fluctuations for both gold and copperRecent volatility in copper prices indicates transitional pressures, yet the fundamental backdrop significantly demands attentionA moderate approach to investment in these spaces while recognizing the inherent risks can benefit from the continuing narrative that revolves around global economic conditions and central bank strategies.