Recent drops in gold and silver indicate liquidity turbulence rather than a structural reversal

Market analysis reveals that recent price declines affecting precious metals should not be interpreted as a sign of sustained weakness. According to Hong Hao’s observations, these movements primarily indicate a technical debt crisis rather than a challenge to the long-term fundamentals of these assets.

When CME rule adjustments trigger a series of liquidations

The recent scenario demonstrates that changes to CME margin rules have caused a chain reaction in the precious metals markets. These adjustments have generated massive stop-loss losses and widespread margin calls, creating a real liquidity crisis. The phenomenon strongly resembles the market dynamics observed in March 2020, where short-term price distortions dominated volatility without reflecting true economic conditions.

This historical analogy is instructive: just as in 2020, the current credit contraction and reduction of leverage in derivatives are producing prices disconnected from fundamentals. Once debt levels return to normalized thresholds, a gradual price realignment is expected.

Structural supports continue to defend gold and silver

Long-term supporting factors remain intact and robust. Several macroeconomic elements continue to strengthen the case for investing in precious metals. Persistent geopolitical tensions maintain demand for safe-haven assets. The US sovereign debt, exceeding $40 trillion, exerts a lasting structural pressure on the dollar’s value. Simultaneously, the global de-dollarization movement is gaining momentum, prompting institutions to diversify their reserves.

Central banks continue to steadily increase their gold holdings, reaffirming their confidence in this metal as a store of value. Meanwhile, industrial demand for silver remains strong, especially in technological and energy applications.

From technical correction to bullish recovery

The current phase thus represents a transitional adjustment within a prolonged bullish trend. Deleveraging of speculative positions and technical corrections are part of the normal market cycle. These events indicate an inevitable consolidation rather than a cycle reversal.

Once leverage levels return to reasonable levels and markets absorb the correction phase, prices should realign with their fundamental drivers. The structural upward trend is expected to resume in the coming quarters, driven by the same macroeconomic forces that have supported it for several years.