In the early hours of trading on January 27, the spot price of gold experienced minor fluctuations, currently hovering around $2742.35 per ounceOn the previous trading day, gold prices fell by approximately $30, representing a 1.1% decrease, retreating from nearly all-time high levels as acknowledged on the preceding trading day, when the price reached as high as $2740.87 per ounceThis decline in gold values was largely attributed to a broad market sell-off triggered by the emergence of DeepSeek, a Chinese artificial intelligence startup that has sent ripples through investor confidence in the tech industry and its dependence on high-performance chip demands.

The downward trend in the global technology stocks reflected a market grappling with uncertaintyNotably, the S&P 500 index dropped 1.46%, and the Nasdaq fell by a remarkable 3.07%. The Philadelphia Semiconductor Index plummeted by over 9%. Nvidia saw a staggering decline of approximately 17%, leading to a historic market value loss of $589 billion, marking the largest single-day loss for any stock to dateOther major players in the tech industry, including Google, which saw a decline of over 4%, and Tesla, Microsoft, and Intel, with declines exceeding 2%, echoed this downturn.

Will Compernolle, a macro strategist at FHN Financial, mentioned that "the news from DeepSeek has heightened the risk-aversion mood across U.S. financial markets." However, he tempered expectations by adding that the impact of this revelation was diminishing as the Federal Reserve's monetary policy meeting on Wednesday nearedThis anticipated meeting is crucial, with markets hoping for clarity regarding the future direction of interest rates amid a backdrop of unsettling market dynamics.

This global stock market decline has triggered a flight to safety across various asset classes, causing U.S

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Treasury yields to drop to a three-week low, and the dollar index hit its lowest level since December 18.

Bart Melek, head of commodity strategies at TD Securities, highlighted that “this sell-off is in large part driven by a sweeping stock market process and not merely influenced by conventional interest or currency exchange factors." He pointed out some liquidity issues within the market, indicating that certain investors may have been forced to liquidate positions, particularly if they previously held volatile stocks through leverage or margin tradingThis chain reaction could further complicate the dynamics between gold and other risk assets being sold off.

Marc Chandler, market strategist at Bannockburn Global Forex in New York, elaborated on the sentiment surrounding U.S. stock valuations, stating, “Many were already concerned about overvaluation, and the DeepSeek incident has laid those fears bare." This unfortunate incident led to subsequent declines, notably in the yields of U.S. 10-year Treasury bonds, which are often seen as a barometer for economic health in comparison to safe-haven currencies like the Japanese yen and Swiss franc, which exhibited relative strength.

As the market awaits the rate decision from the Federal Reserve at the end of Wednesday's Federal Open Market Committee meeting, there is a prevailing expectation that the Fed will maintain its overnight rate within the 4.25% to 4.50% range, with many analysts suggesting a "dovish pause".

Vincent Reinhart, chief economist at NYCB, stressed that "the Federal Reserve will not take action without understanding new government policies

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They find themselves in a difficult position when it comes to providing guidance, especially given their dependence on certain government policies for predictions." This uncertainty compounds the complexity of fiscal projections and affects market sentiment.

Recent calculations from the London Stock Exchange Group indicate that amid the latest sell-off in equities, the U.S. rate futures market has priced in an expectation for two rate cuts this year, totaling 51 basis points, a moderate shift from predictions made just a few days prior which only anticipated a 36 basis point cutFor most of the month, the market was only factoring in a single cut.

Additionally, today’s trading session will see the release of U.S. durable goods orders for December, which remains a focal point for investors.

Surveys reveal that despite a strengthening dollar and diminished Fed rate cut expectations, the uncertainty in the U.S. economy and intensifying inflation fears are expected to bolster gold demandProjections suggest that gold prices could reach all-time highs by 2025, with a recent survey of 36 analysts and traders suggesting a median price forecast of $2756 per ounce for 2025, surpassing the previous prediction of $2674 made three months ago.

Spot gold prices reached a record high of $2789.95 per ounce in late October, with the recent closing price recorded at $2740.87 per ounceThe average price for gold in 2024 is projected at $2386, indicating a significant year-on-year increase.

Gold prices surged by a whopping 27% throughout 2024, marking the most substantial increase since 2010 and positioning it as one of the standout performing assets for the year

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Investors are increasingly turning to gold as a hedge against global risks, particularly as the Fed's three interest rate cuts have further underscored gold's allure among investors.

Independent analyst Robin Bhar remarked, "Geopolitical risks continue to simmer in various hotspots worldwide, raising inflation concerns and driving demand for gold as a safe haven." The sensitivity of market conditions remains fluid, impacted by several uncontrollable international dynamics.

Throughout November and December, gold prices saw a slight retraction following the Fed's December meeting, where policymakers adjusted their expectations for rate cuts expected in 2025 downward.

As January 2025 approaches, concerns surrounding U.S. import tariffs and potential trade conflicts that might ignite inflation expectations are expected to provide additional support for gold prices.

Analysts predict that silver prices will benefit from robust industrial demand, particularly in green technologies and renewable energy sectorsHowever, muted demand from exchange-traded funds (ETFs) and the potential impact of tariffs on global economic growth could challenge the outlook for silver.

According to Suki Cooper, a Standard Chartered analyst, "The silver market is anticipated to remain in a deficit in 2025, but supply shortages alone may not suffice to drive prices higher." She noted that investment demand has struggled to keep pace in recent months.

The forecast for 2025 suggests an average silver price of $33.10 per ounce, lower than the prior estimate of $33.75 but still above the current $30.20 level.

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