Gold’s rally teeters as demand falls in China and India, silver faces further downside risk
NEW YORK (March 3) Weakening demand in the most important regions is threatening gold’s rally, while silver continues to underperform the yellow metal as it faces the risk of a sharper slide, according to precious metals analysts at Heraeus.
In their latest precious metals update, the analysts noted that the gold rally has run into headwinds as demand declines in key markets.
“India’s February gold imports are on track for a 20-year low, while China’s January imports via Hong Kong plunged 44% month-on-month—the weakest since April 2022,” they wrote. “After hitting 40 fresh all-time highs in 2024 and gaining 10% year-to-date, gold’s relentless climb may be feeling the drag from softening consumer demand in its two biggest markets.”
Gold has traded at a discount in China over the past two weeks, and in India since early January. “Jewellery demand was also down year-on-year in 2024: 24% lower in China and 2% lower in India,” they noted. “With prices at historic highs, the volume of gold purchased could fall further even if total spending holds steady, meaning Q1’25 demand in India is likely to trail the 139 tonnes recorded in Q1'24.”
The technical picture also has gold looking overstretched, and last week’s price action appears to have confirmed this view. “After setting a fresh high on Monday, gold reversed to $2,917/oz,” they said. “Pressure intensified on Thursday when President Trump announced new tariffs on Mexican, Canadian, and Chinese goods, triggering a 1.7 percentage point spike in the dollar index to 107.2. Gold closed Friday at $2,849/oz, leaving a bearish engulfing pattern on the weekly candle chart.”
Gold prices remained in positive territory on Monday, but they’ve pulled back from their earlier highs above $2,890. Spot gold last traded at $2,884.42 per ounce for a gain of 0.92% on the session.
Turning to silver, Heraeus said that the gray metal remains stuck in gold’s shadow, and prices could fall precipitously if gold continues to falter.
“Silver underperformed gold in 2024, and the gap is widening in 2025,” they wrote. “Last week, silver fell 3.1%, a sharper drop than gold’s 2.1% decline. Despite strong industrial demand— especially from solar—the metal’s nearly 7% year-to-date gain still lags gold’s 10% rise.”
The analysts believe silver’s underperformance could accelerate if gold faces a sustained correction. “The gold-to-silver ratio has now held above 90 for five straight days—a rare feat,” they said. “Since 2020, only May 2022 saw a longer stretch, lasting 19 days.”
After multiple attempts to break above $13.800 failed, silver has begun to give back some of Monday’s gains, but it remains well in the green. At the time of writing, spot silver last traded at $31.556 per ounce and is up 1.30% on the daily chart.
KitcoNews
