Gold holds drop as traders focus on US-China trade, credit woes

[MELBOURNE] Gold steadied following a sharp drop for precious metals on Friday (Oct 17), with traders weighing the latest developments in trade tensions as well as jitters surrounding US regional banks’ credit exposure.

At the end of a volatile week, bullion closed 1.7 per cent lower in its biggest daily decline since May. Silver also traded little changed on Monday after tumbling 4.3 per cent in the previous session as a squeeze in London stockpiles eased. Technical indicators show that a ferocious rally for both metals that began in August and pushed them to fresh records last week may be overheated, setting the stage for pullbacks.

Traders are now focused on upcoming meetings between the US and China, after US President Donald Trump late last week expressed optimism that talks with Beijing officials could yield an agreement to defuse the trade crisis, calling his threatened high levies unsustainable. Tangible signs of progress may cool demand for haven assets, such as gold and silver.

Still, investors remain uneasy about credit risks at US financial institutions after two regional lenders last week revealed loan troubles tied to alleged fraud. The problems at Zions Bancorp and Western Alliance Bancorp – both due to report results this week – may offer an early test of whether risky lending practices are emerging.

Precious metals have been on a tear this year, with gold registering a ninth straight week of gains last week. Prices are up more than 60 per cent so far in 2025, underpinned by central-bank buying and inflows to exchange-traded funds (ETFs). It’s also benefited from soaring demand for havens in the face of geopolitical and trade tensions, rising fiscal and debt levels, and threats to the Federal Reserve’s independence. 

Silver, meanwhile, has run even harder – surging around 80 per cent this year – with gains driven by some of the same macro factors supporting gold. In London, a lack of liquidity sparked a worldwide hunt for the metal as benchmark prices soared above futures in New York.

Over the past two weeks, more than 20 million ounces of silver have been withdrawn from warehouses linked to the Comex futures exchange in New York. Much of that likely headed to London, where it should help ease tightness. The price gap between the two trading hubs remains wide at about US$1.35 an ounce, though that’s much narrower than a spread of as much as US$3 last week. There was also a hefty 10 million ounce outflow from silver-backed ETFs on Thursday.

Spot gold was 0.3 per cent lower to US$4,238.96 an ounce at 8.01 am in Singapore. The Bloomberg Dollar Spot Index was up 0.1 per cent. Silver was flat, while platinum and palladium fell. BLOOMBERG