The US Fed's policy meeting minutes from April 30 to May 1 indicated that Fed officials emphasized that due to disappointing inflation data, the policy rate needs to remain at its current level for longer than previously anticipated. This news put pressure on precious metal futures. As of 15:48 on May 23, COMEX gold fell 1.25% to $2,363/oz. Notably, after hitting a historical high on May 20, COMEX gold began a slight adjustment on May 21 and has fallen for three consecutive trading days as of May 23. COMEX silver fell 3% to $30.55/oz, also marking a three-day losing streak. SHFE gold also fell for three consecutive trading days, closing at 559.72 yuan/g on May 23, down 2.61%. SHFE silver saw a significant adjustment on May 23, closing at 7,954 yuan/kg, down 4.99%. The price spread between SHFE silver and COMEX silver also narrowed.

In the A-share market: The precious metals sector led the decline among all sectors with a drop of 4.32%. As of the close on the 23rd, Chengxiao Technology fell 10.21%, Hunan Silver and Sichuan Gold fell over 5%, and Western Gold, Chifeng Gold, and Zijin Mining all fell over 3%.

News

On May 22 local time, the US Fed released the minutes of the Federal Open Market Committee (FOMC) meeting held from April 30 to May 1. The minutes showed that officials believe it will take longer than previously expected to be more confident that inflation is falling back towards 2%. Recent economic data shows a downward trend in inflation, but Fed policymakers said they should wait a few more months to ensure inflation is truly on track to return to the 2% target before cutting rates. The policy rate path derived from futures prices implies fewer than two 25 basis point rate cuts by the end of the year.

On May 21, SHFE announced that from the close of trading on May 23, 2024 (Thursday), the margin ratio and daily limit for gold and silver futures contracts would be adjusted as follows: the daily limit for gold and silver futures contracts would be adjusted to 10%, the margin ratio for hedging transactions would be adjusted to 11%, and the margin ratio for speculative transactions would be adjusted to 12%. If the scenario specified in Article 12 of the SHFE Risk Control Management Measures occurs, the margin ratio and price limit will be adjusted based on the above ratios.

On May 20, SHFE announced that from the close of trading on May 21, 2024 (Tuesday), the margin ratio for Au (T+D), mAu (T+D), Au (T+N1), Au (T+N2), NYAuTN06, and NYAuTN12 contracts would be adjusted from 9% to 10%, and the daily limit for the next trading day from 8% to 9%. The margin ratio for Ag (T+D) contracts would be adjusted from 12% to 13%, and the daily limit for the next trading day from 11% to 12%.

On May 20, the Shanghai Gold Exchange issued a notice on strengthening market risk control. The notice pointed out that there are many uncertainties affecting market operations recently, market risks have significantly increased, and price volatility has become more pronounced. All member units are requested to enhance risk prevention awareness, carefully prepare risk emergency plans, remind investors to take risk prevention measures, reasonably control positions, and invest rationally.

Spot Silver Prices Plunge, Market Transactions Improve in the Afternoon

In the spot silver market: Affected by the significant decline in SHFE silver, on May 23, the ex-factory reference price for SMM 1# silver in the morning was 7,931-7,933 yuan/kg, with an average price of 7,932 yuan/kg, up 443 yuan/kg from the previous day, a drop of 5.29%. According to SMM, although spot silver also saw a decline following the adjustment in precious metals, the spot silver market was highly cautious in the morning, with only a few on-demand purchases. In the afternoon of the 23rd, as the decline in silver futures narrowed slightly, the spot silver market transactions improved compared to the morning.

Institutional Voices

FXStreet analyst Christian Borjon Valencia believes that the first support level for gold prices will be the low of $2,332/oz on May 13, followed by the low of $2,303/oz on May 8. Once this level is breached, the next bearish target will be the 50-day simple moving average (SMA) of $2,284/oz. However, if buyers push gold prices above $2,400/oz, gold prices may retest the year-to-date high of $2,450/oz.

Galaxy Futures Research Report pointed out: Precious metals fell from highs, and long positions exited. The Fed's May meeting minutes raised concerns about persistent inflation, indicating that the Fed may not cut rates soon, leading to a sharp decline in the precious metals market. On May 22 local time, the US Fed released the minutes of the FOMC meeting held from April 30 to May 1. The minutes showed that the Fed decided to slow down the pace of interest rate hikes in May, keeping the federal funds rate target range at 5.25%-5.50%. According to Reuters, after the release of the Fed meeting minutes, Goldman Sachs CEO David Solomon said he expects the Fed will not cut rates this year. Technically, gold prices fell sharply after approaching the previous high, indicating significant resistance around $580, while silver, despite hitting new highs, also faces significant resistance historically above $33. Therefore, after a substantial rise, precious metals have entered an adjustment phase.

Jinyuan Futures Research Report believes: The Fed meeting minutes show that policymakers are concerned about insufficient progress in reducing inflation and believe it will take more time to be confident in cutting rates, suggesting that the high-interest-rate stance should be maintained longer. Several policymakers are inclined to further interest rate hikes if inflation risks reignite. Goldman Sachs CEO said he currently expects the Fed will not cut rates this year, as US government spending indicates the country's economy is more resilient. As expected, the Fed meeting minutes were hawkish, and previously strong commodities fell from highs. The market is expected to continue trading on the logic of delayed rate cuts in the short term, and gold and silver prices will continue to adjust.

Commerzbank expects gold prices to fall to $2,300/oz in H2 2024.

Morgan Stanley said the risk for gold remains skewed to the upside; the likelihood of gold prices rising to $2,760/oz is higher.

Société Générale pointed out that geopolitical risks in the Middle East are driving gold prices higher. Geopolitical dangers reflect a breakdown in trust between parties. Since the 2008 global financial crisis, confidence in the dollar has weakened. This is not an issue that formed overnight, and the solution cannot be achieved overnight either. Therefore, gold has the fundamental conditions for an upward trend

CITIC Securities believes that looking ahead to 2024, the growth in the gold jewelry industry will still mainly come from the increase in sales of gold jewelry. However, given the high gold price background, the sales amount of gold jewelry is unlikely to see a significant increase, and there may even be fluctuations in terms of volume.