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

Gold and silver spot markets have rebounded strongly, with gold prices rising sharply and silver spot prices surging by over 7%-8% intraday, sharply pulling away from overnight lows and shedding the shadow of previous heavy declines. The rally was mainly driven by bargain buying, a slight weakening of the US dollar, and market expectations of easing geopolitical risks 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: Uncertainty in global markets has intensified, especially due to geopolitical tensions and US diplomatic negotiations, triggering market risk aversion. This sentiment has boosted demand for precious metals, particularly increasing silver’s appeal as a safe-haven asset. Investors, amid risk-averse sentiment, are allocating funds into gold and silver to hedge against market turbulence. Rate cut expectations: Weak signals from the US labor market and relatively soft economic data have heightened market expectations of a Federal Reserve rate cut.

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 possibly 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 strong upward pressure on silver prices.

In Lao Mu’s view, the gold bull market will create a butterfly effect, transmitting to silver and then driving up base metal prices until it disturbs the new and old drivers 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. In the current international situation, the impact of commodity price fluctuations has far exceeded 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 and suppressing the global economy. Personally, I see both pressure and opportunity coexist [In the Americas, the fences are tight, the westward breakthrough and eastward exit are temporarily suppressed, so it feels like the US is strategically shrinking, but behind the scenes, it’s a series of coordinated moves—more like a long-term premeditated suppression policy!]

From the daily K-line of gold, the price has resumed its rebound, aligning with our short-term bearish and long-term bullish trading approach. The Friday daily K-line closed above the midline; next week, we can plan entries based on staying above the midline. Support levels are around 4870, with resistance at 5100. Key resistance is near 5160, around the 0.618 Fibonacci retracement. Watch how the market develops for further direction.

In Lao Mu’s view, early next week, focus on the 4-hour oscillation range of 5095-4720; secondly, observe the daily K-line’s oscillating upward trend; assess where the secondary high point will be in this rebound—whether it faces resistance or continues to break through; finally, the fundamental risks have not been fully resolved, and there’s a possibility that in the mid to late term, fundamentals could spiral out of control, leading to further risk aversion and market changes, pushing gold’s safe-haven break below 5600.

Markets do not have eternal one-sided booms; only eternal cyclical rotations. Understanding the underlying phase battles behind appearances allows us 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—Buddha’s blessing to those with fate; I only guide those with sincere hearts.