Executive Summary

The precious metals complex faces a pivotal week as gold plunged $87.30 (-2.62%) to $3,241.80 per ounce this morning following the weekend's surprise US-China trade agreement in Geneva. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng's breakthrough deal, which slashes bilateral tariffs from 145% to 30% on most goods effective Wednesday, has dramatically shifted market dynamics and reduced immediate safe-haven demand.

Silver showed relative resilience, declining just $0.08 (-0.24%) to $32.87, while platinum and palladium dropped approximately $15 and $22 respectively from Friday's close. The gold-to-silver ratio tightened to 99.33:1, suggesting potential outperformance ahead for the white metal amid its severe supply deficit. Tuesday's Consumer Price Index release at 8:30 AM ET will provide the first major test for precious metals following the trade breakthrough.

Current Market Position

Prices as of Monday, May 12, 2025 at 9:00 AM ET

Technical Analysis

Gold: Sharp Reversal Tests Major Support

Gold's sharp decline brings the first major support zone at $3,150-3,170 into focus – a level identified as critical for maintaining the broader uptrend. The metal had been consolidating between $3,200-3,450 following April's spike to $3,500, with today's move testing the lower boundary. The 50-day moving average near $3,100 offers additional support should selling intensify.

This morning's sharp reversal creates the first significant buying opportunity since April's consolidation began. The convergence of seasonal buying patterns, extreme positioning, and pivotal Fed decisions creates heightened opportunity for institutional traders willing to navigate the volatility.

Silver: Supply Deficit Supports Resilience

While gold grabs headlines with its volatility, silver's structural deficit enters its fifth consecutive year with projected shortfalls of 149 million ounces in 2025. Global demand of 1.20 billion ounces overwhelms supply at 1.05 billion ounces, with mine production down 7.23% from 2016 levels. This morning's modest 0.24% decline versus gold's 2.62% drop highlights the metal's dual nature.

Critical support sits at $34-35, where buyers emerged during April's consolidation. Silver faces immediate resistance at $37-37.50, with the psychologically important $40 level looming as the next major hurdle.

Week Ahead Calendar

Trading Scenarios

Key Themes for the Week

Trade Détente Reshapes Market Dynamics

The Geneva agreement marks a significant de-escalation from April's extreme volatility when US tariffs on Chinese imports had reached 126.5%. Markets are interpreting the 90-day implementation period beginning Wednesday as a major diplomatic victory for the Trump administration, though underlying tensions remain unresolved. The agreement temporarily suspends export restrictions on 28 US companies while maintaining controls on seven rare earth metals.

Central Bank Accumulation Continues

First-quarter central bank gold purchases of 244 tonnes exceeded the five-year quarterly average by 24%, with Poland leading at 49 tonnes as it targets 20% of reserves in gold. China officially added 13 tonnes, extending its buying streak to 17 months, though unreported purchases likely dwarf official figures. This persistent sovereign buying provides a crucial floor for gold prices.

Silver Supply Crisis Intensifies

Industrial demand hit its fourth consecutive record at 680.5 million ounces in 2024, driven by AI applications, green energy infrastructure, and electric vehicle production. Despite a 24% increase in recycling to 195 million ounces, secondary supply cannot offset the structural shortage. The 2021-2024 combined deficit of 678 million ounces equals 10 months of global mine supply.

Week Ahead Outlook

Today's sharp reversal creates the first significant buying opportunity since April's consolidation began. Traders should focus on Tuesday's CPI data as the immediate catalyst – a miss on consensus could extend the selloff toward major support levels, while any upside inflation surprise would likely trigger a sharp reversal given lingering stagflation concerns.

Wednesday brings multiple Fed speakers including Governor Waller and Vice Chair Jefferson, offering clues about the policy trajectory before Powell's critical Thursday address. The concentration of high-impact data Thursday morning – PPI, retail sales, and industrial production – followed immediately by Powell's speech creates potential for outsized volatility.

The precious metals complex enters this week at a critical juncture. While the US-China trade agreement removes immediate crisis risk, fundamental support remains intact through persistent inflation, massive fiscal deficits, central bank accumulation, and in silver's case, severe supply shortages. Today's selloff reflects repositioning rather than structural change – creating opportunities for investors focused on the longer-term trajectory rather than daily volatility.