These days, a rumor is spreading in the metals market that China is banning Gold and Silver trading. Because of this panic selling has started and most of the people selling are individual investors who still do not understand this false rumor or why China would stop trading in such strong metals.
Many people are under the misunderstanding that on July 24, the Chinese government is banning all Gold and Silver trading. Because of this, they are selling their holdings in a hurry.
But the real fact is that the Chinese government is only banning paper trading also known as leveraged trading to reduce market volatility. Real trading or physical trading has never been banned and will continue as usual.
Many analysts or people who consider themselves analysts believe that because leveraged futures trading will stop in China on July 24 there will be heavy selling and metal prices will fall sharply.
However, I do not agree with this view...
On July 24, when this ban takes effect there may be some temporary selling pressure because futures contracts will expire and many positions will be closed automatically. This may have a short term impact on the market.
But since physical trading will continue, traders will keep buying physical Gold and Silver and demand will continue to increase.
I believe that instead of Gold and Silver prices falling they will start rising after July 24 and may reach another strong peak.
The reason is that real demand for physical metals will return.
In futures trading there is often fake pump and dump activity and heavy short selling pressure. But because China is one of the largest markets for metal trading, once leveraged trading is banned people will focus only on buying and selling physical metals.
This means there will be much less selling pressure. It also shows that we are unlikely to see sharp selling in these metals. Instead we will see normal price movements.
So do not worry about the July 24 news. Hold your positions firmly because I believe the next target for Silver is above 60.
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