SunSirs: Precious Metal Prices Continued to Fall Sharply

After hitting record highs, precious metal prices fell sharply

According to the commodity market analysis system of SunSirs, as of October 28, 2025, the spot market price of gold was 908.26 RMB/gram, up 4.15% from the gold spot market price of 872.11 RMB/gram at the beginning of this month (October 1), and down 7.90% from the gold spot market price of 986.21 RMB/gram on October 21. The price of gold rose first and then fell within the month, repeatedly setting new highs in the early stage, and began to fall from the highs in the second half of the month. The overall price was still at an absolute historical high.

According to the commodity market analysis system of SunSirs, the average market price of silver on October 28, 2025 was 11,168.67 RMB/kg, up 2.56% from the average market price of silver of 10,890.33 RMB/kg at the beginning of this month (October 1), and down 5.50% from the average market price of silver of 11,891 RMB/kg on October 21.

Precious metals and crude oil price trends at a glance

Since 2025, the price correlation between precious metals and Brent crude oil has shifted from a weak positive correlation in the short term to a significant negative correlation in the long term.

A comparison of precious metal price trends for gold and silver over the past year

Over the past year, gold and silver have consistently maintained a strong positive correlation. Their prices have generally fluctuated in the same direction, with their upward and downward trends largely synchronizing over most periods. For example, during the upward trend from late October 2024 to April 2025, as well as the subsequent fluctuations and subsequent upward movement, the two trendlines have largely aligned.

What drove the recent price correction?

The recent decline in gold prices was the result of multiple factors including geopolitical easing, a stronger US dollar, a technical correction, changes in Federal Reserve policy expectations, and a seasonal decline in physical demand.

1.  Geopolitical risks eased, and safe-haven demand plummeted

Geopolitical tensions, which had previously supported gold's rise, have shown a significant easing. Regarding the Russia-Ukraine conflict, Ukrainian President Zelensky expressed his readiness to end the conflict, and the two sides reached a statement using the current contact line as the starting point for negotiations. There have also been positive developments in the Middle East, with a breakthrough in ceasefire negotiations between Israel and Hamas, reducing the risk of a large-scale ground offensive. Meanwhile, China-US trade relations were signaling a thaw, with the Trump administration temporarily suspending its plan to impose 100% tariffs on China and planning trade talks at the end of October. These developments directly weakened market demand for gold as a safe haven, leading to a rapid outflow of funds from the gold market.

2.  The strengthening of the US dollar suppressed gold prices

The US dollar index has recently rebounded, breaking through 104 on October 23rd (a new high for the year). Gold is priced in US dollars, and a stronger dollar makes gold more expensive for investors holding other currencies, dampening demand. The dollar's strength is driven by strong US economic data, increasing market optimism about the US economic outlook, and uncertainty surrounding the Federal Reserve's monetary policy, which has also boosted the dollar's appeal.

3.  Technical overbought conditions triggered profit-taking and selling

Gold prices had previously surged dramatically, breaking through $4,380 per ounce in London on October 17th, a record high. This short-term cumulative increase exceeded 30%, and technical indicators were severely overbought (the RSI remained above 70 for several consecutive days). This extreme upward trend accumulated a large amount of profit-taking. When bearish market signals emerged, investors rushed to take profits, triggering a chain reaction of selling. Furthermore, automated sell orders triggered by algorithmic trading systems after prices fell below key support levels further amplified the decline, creating a "buy-kill-buy" situation.

4.  Changes in Fed policy expectations and rising opportunity costs

Market expectations for the pace of the Federal Reserve's rate cuts were divided. While most institutions anticipated a 25 basis point cut at the end-October meeting, recent statements from Fed officials signaled a cautious stance amidst a dovish tone, suggesting the rate cut may not represent a policy shift but rather an insurance measure. This uncertainty had caused the market's probability of a cumulative 50 basis point cut in December to drop from 94% to 87%, pushing real interest rates back up from -0.1% to 0.2%. This had increased the opportunity cost of holding gold, dampening bullish sentiment.

5.  Seasonal decline in physical demand

As a major global gold consumer, India's Diwali peak buying season had ended, and the holiday-driven buying frenzy had subsided, ushering in the traditional off-season for gold purchases. Data from the World Gold Council showed that India's gold imports in October fell by approximately 35% month-over-month, from 120 tons in September to 78 tons. This seasonal decline in demand had directly weakened the market's ability to absorb gold. Domestic demand had also cooled, with net outflows from the gold ETF market reflecting the impact of plummeting prices on retail investor sentiment.

Market Forecast:

The decline in precious metals this time was the result of the resonance of factors such as profit-taking, geopolitical easing, liquidity pressure, and deterioration of position structure. It was a phased adjustment after the previous rise.

In the future, the precious metals market will fluctuate in the short term, diverge in the medium term, and improve in the long term. From a long-term perspective, factors such as global central banks' continued gold purchases to promote reserve diversification and the long-term challenges faced by the US dollar credit system will continue to provide long-term support for gold prices.

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