- Asian market closures have created a short‑term liquidity vacuum, pushing spot gold down 1.9% and silver down 2.8%.
- China’s export curbs on silver add a structural headwind for the metal’s industrial demand.
- Despite the dip, gold remains above the psychologically important $5,000 level, supported by central‑bank buying.
- Technical ranges point to gold consolidating between $4,650‑$5,100 and silver between $70‑$90.
- Investors can adopt a buy‑on‑dip, sell‑on‑rally approach while monitoring Fed minutes for rate‑policy clues.
You missed the liquidity vacuum that’s dragging gold and silver lower.
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Why the Lunar New Year Shutdown Is Squeezing Gold Prices
The Chinese Lunar New Year holidays shut down the Shanghai Gold Exchange (SGE) and Shanghai Futures Exchange (SHFE) from February 16‑24. Those venues account for a sizable share of global gold turnover, acting as a price‑discovery engine and a source of the so‑called “Shanghai Premium.” When they close, the premium evaporates, leaving the market with a pure “liquidity vacuum.” With fewer participants, even modest sell orders can move the price sharply.
On February 17, spot gold slipped to $4,898 per ounce, a 1.9% decline, while U.S. futures fell 2.6% to $4,918. The drop was amplified by a stronger U.S. dollar, which rose on fresh optimism surrounding U.S.–Iran nuclear talks and easing Ukraine‑Russia tensions. In a market where the dollar is the dominant safe‑haven currency, a firmer greenback directly depresses gold’s dollar‑denominated price.
Historically, similar holiday‑driven liquidity squeezes have produced short‑lived price troughs followed by rapid recoveries once the SGE reopens. The pattern was evident after the 2022 Spring Festival, when gold rebounded by over 3% within a week of the exchange’s return.
Why Silver Is Under Extra Pressure from Chinese Export Controls
Silver’s narrative is two‑fold: industrial demand and speculative exposure. China is the world’s largest consumer of industrial silver, using it in photovoltaics, electronics, and automotive sectors. On December 30, Chinese regulators tightened export licences for silver, tightening the supply pipeline to global manufacturers, especially those in the United States.
Combine that with the Lunar New Year shutdown, and the market faces a “double‑hit.” MCX silver in India fell 2% to ₹2,35,206 per kilogram, while spot silver in the U.S. slid to $74.46 per ounce, a 2.8% drop. The reduced visibility of Chinese demand means market participants are pricing in a potential supply shortage, yet the immediate effect is a sell‑off as traders unwind positions in a thin market.
In 2020, a comparable export‑control episode coincided with a 5% dip in silver, after which the metal rallied as the restrictions eased. The lesson: short‑term pain can mask a longer‑term bullish catalyst.
Broader Market Forces: Dollar Strength and Geopolitical Calm
A stronger dollar and muted geopolitical risk have jointly sapped safe‑haven demand. When President Trump signaled indirect involvement in upcoming U.S.–Iran talks, risk sentiment improved, prompting investors to rotate out of gold and silver into higher‑yielding assets.
At the same time, the market is eyeing the Federal Reserve’s January minutes for clues on the June rate‑cut outlook. A consensus of a June cut remains, offering a medium‑term tailwind for precious metals, but the immediate focus is on the liquidity gap.
Technical Landscape: Price Ranges and Trading Strategies
From a chartist’s perspective, gold is holding above the $5,000 ceiling, a level that has historically acted as support. The next resistance lies near $5,100, while a breach below $4,650 could trigger a deeper correction.
Silver is more volatile. Analysts project a consolidation window between $70 and $90. Traders should watch the 200‑day moving average (around $78) as a pivot point. A rebound above $80 could signal the start of a short‑term rally, while a dip below $72 may open the door to a more pronounced downtrend.
Definitions:
- Liquidity Vacuum: A temporary lack of market participants that widens bid‑ask spreads and amplifies price moves.
- Shanghai Premium: The price differential between gold traded on the Shanghai exchange and the global spot price, reflecting regional demand.
Investor Playbook: Bull vs. Bear Cases
Bull Case: If the Fed signals an earlier rate cut than June, the dollar could weaken, reigniting safe‑haven demand. Re‑opening of the SGE may also trigger a “Sentiment Reset,” with pent‑up buying from Chinese retail investors. In that scenario, gold could retest $5,200 and silver could climb back above $80.
Bear Case: Continued dollar strength, coupled with persistent geopolitical calm, could keep risk‑off flows at bay. If China maintains tight silver export controls, industrial demand could stay muted, dragging silver lower toward $65. A prolonged holiday period in Asia would extend the liquidity vacuum, allowing short sellers to push prices further down.
Prudent investors might adopt a “buy‑the‑dip” stance on gold at $4,650‑$4,800, while positioning silver with put spreads to profit from potential downside. Monitoring the Fed’s minutes and the SGE reopening calendar will be critical for timing entries and exits.