Gold has declined approximately 7.2% over the month, according to figures cited in an Investing.com commentary. Its author argues the drop may reflect forced liquidation rather than a lasting change in direction for precious metals.
Gold reportedly declined approximately 7.2% over the month and 3.26% year-to-date, based on figures the Investing.com piece says were supplied to it. The author calls the past month exceptionally challenging for gold and silver investors.
The selloff comes amid the Iran conflict, crude oil above $110 per barrel, renewed inflation concerns and uncertainty over Federal Reserve interest-rate policy.
Liquidity shortage may explain the selling
The author believes investors must separate a temporary liquidation cycle from a fundamental change in the long-term direction of precious metals. One of the primary forces potentially behind the selling, the author writes, is a shortage of global liquidity.
Governments face large debt obligations and rising financing costs. As a result, major institutions may have to sell liquid assets such as gold and silver to raise cash. That could help explain why a traditional safe haven came under pressure during heightened geopolitical uncertainty.
Capital rotation and central-bank demand
The author also points to capital rotation. Substantial capital has flowed into artificial intelligence-related equities and cryptocurrency markets in recent months, but questions over valuations, profitability, cybersecurity and market concentration are adding uncertainty there. A meaningful loss of investor confidence could eventually push capital toward alternative stores of value.
Continued official-sector demand, in the author's view, suggests gold remains strategically important to monetary authorities seeking diversification. The author adds that the 1970s showed precious metals can perform strongly during substantial inflation and monetary instability, even with elevated interest rates.
The author believes the next several weeks could prove particularly important. If forced liquidation subsides, precious metals could see a meaningful reversal, but the commentary stresses that confirmation must come from price action, liquidity conditions and a sustained recovery above key technical resistance levels.
Source: Investing.com
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