Mushin Xuan: The gold rebound hides secrets, is it a buying opportunity?

The spot market for gold and silver has rebounded strongly, with gold prices rising significantly and silver spot prices surging within the day by over 7%-8%, sharply recovering from overnight lows and shedding the shadow of previous heavy declines. The rally was mainly driven by bargain-buying influx, a slight weakening of the US dollar, and market expectations of geopolitical risk mitigation due to the US-Iran nuclear negotiations held in Oman. Gold is expected to achieve weekly gains; silver has rebounded strongly from a one-and-a-half-month low.

Rising Safe-Haven Demand: Global market uncertainties have intensified, especially due to geopolitical tensions and US diplomatic negotiations, triggering risk-averse sentiment. This sentiment has boosted demand for precious metals, particularly silver, which is increasingly attractive as a safe-haven asset. Investors, amid risk aversion, are reallocating funds into gold and silver to hedge against market turbulence. Expectations of rate cuts: Weak signals from the US labor market and relatively soft economic data have heightened market expectations of Federal Reserve rate cuts.

This expectation supports the prices of non-yield assets like silver, as rate cuts typically reduce the opportunity cost of holding precious metals. As more investors seek to diversify their portfolios, silver, as an alternative to gold, has attracted increasing capital inflows. Silver Supply and Demand: Recently, reports indicated that COMEX might face a silver delivery crisis, with delivery pressures potentially emerging as early as March.

COMEX registered silver reserves have fallen to 103 million ounces, while open interest in the market is as high as 429 million ounces. If 25% of these contracts require physical delivery, COMEX could face delivery default risks. Even if March passes smoothly, this delivery pressure could intensify again in May or July, which would undoubtedly exert a strong upward push on silver prices.

In Lao Mu’s view, the gold bull market will create a butterfly effect, transmitting to silver and further driving the prices of base metals until it disturbs the new and old dynamics of the global economy, pushing up traditional energy prices. For China, rising energy costs may increase trade balance pressures and further challenge industrial corporate profits. Under the current international situation, the impact of commodity price fluctuations has gone far beyond economic and financial significance. The cyclical nature of commodity prices has weakened, and price resilience continues to strengthen. The importance of commodities for national strategic security will rise to an unprecedented level.

Follow-up operational suggestions:

Trend-wise, the US-Iran negotiations on February 6 seem to have made no substantial progress! Coupled with issues in Europe, the Middle East, Asia-Pacific, South America, US debt, and the US dollar, these problems currently lack significant breakthroughs and are difficult to resolve all at once! The long-term fundamentals remain mostly bullish for now; however, when connecting these fundamentals, it appears more like a strategy of US strategic containment—encircling the globe and suppressing it. Personally, I see pressure and opportunity coexist. The “American strategy” of tightening the fence, the western breakthrough, and the eastern outlet are all currently suppressed, so it seems that the US’s talk of strategic contraction is actually a series of coordinated, long-term suppressive policies.

From the daily gold chart, the price has resumed its rebound, aligning with our short-term bearish and long-term bullish trading approach. The Friday daily candle closed above the midline; next week, we can plan entries based on staying above this midline. Support levels are around 4870, with resistance at 5100. Key resistance is near 5160, around the 0.618 Fibonacci level. The specific market evolution depends on subsequent developments.

In Lao Mu’s view, early next week, focus on the 4-hour oscillation range of 5095-4720; secondly, observe the daily candle’s oscillating upward trend; assess where the next high point of this rebound will be—whether it faces resistance or continues to break through. Lastly, the various risks in the fundamentals have not been fully resolved; a breakdown in fundamentals in the mid-to-late term cannot be ruled out, which could lead to further safe-haven demand and market changes, pushing gold’s safe-haven breakout above 5600.

Markets do not have eternal one-sided booms, only eternal cyclical rotations. Seeing through the superficial stage battles allows one to stay clear-headed amid rises and falls and to seize real opportunities amid volatility.

I hope you can break free from habitual thinking, dismantle mental barriers. I am Mu Xinxuan, a Buddha guiding those with affinity. I only guide those with sincere hearts.