07.07.202210:42 Forex Analysis & Reviews: Demand for gold and silver bars decreased

Gold prices have fallen sharply this week, testing at around $1,730 an ounce. But some analysts say lower prices could help revive the physical precious metals market and attract new retail investors.

In fact, sentiment in the gold market was initially bullish last month because investors viewed the metal as an important hedge against inflation. The idea did not last long as selling pressure increased in the market.

The US Mint said it sold 44,000 ounces of gold, down nearly 75% from the 175,000 ounces it sold in May. For the year, gold bar sales have dropped 76% compared to 182,000 ounces sold in June 2021.

The data is quite startling given how strong demand has been throughout the year. Nevertheless, the total sales of US Mint were 733,500 ounces, up from the 653,000 ounces sold in the first half of 2021.

Some analysts related the decrease in sales to the sharp correction in the stock markets. The S&P 500 reportedly fell 23% in the first half of 2022, which is its worst semi-annual performance since the 1970s. Economists say that under these conditions, retail investors do not have much capital to buy physical bars.

But there is another headwind that the market is facing. According to the chief market strategist of Blue Line Futures, gold will be in steady demand until the end of the year. Talking about silver, it struggled through most of June and this uncertainty was reflected in physical demand. Mint said it sold 861,000 ounces last month, down 36% from the 1.35 million ounces sold in May. Sales have also fallen by 69% compared to last year.

Economists say the metal continued to decline last month because recession fears intensified. Although silver is an important monetary metal, more than half of the market demand is for industrial use.

Gold prices have fallen to their lowest level since September 2021, while silver prices are at their lowest level since July 2020.

Concerns about a looming recession grew steadily in June as the Federal Reserve aggressively raised interest rates to curb inflation. Markets are expecting the US central bank to increase rates by another 75 basis points at the end of the month.