Introduction: Why Precious Metals Can't Relied on Just One Analysis Method

In financial markets, technical analysis and fundamental analysis are often viewed as two different or even opposing paths. However, in the precious metals market, relying solely on either method usually makes it hard to build a complete and stable understanding. This is because precious metals are neither pure industrial commodities nor simple financial assets—they are a unique class of highly "macro-driven" assets.

Therefore, understanding the roles and boundaries of both technical and fundamental analysis in precious metals is much more important than just learning a specific indicator or tracking a piece of macro data.

Fundamentals: Answering "Why Are Precious Metals Going Up or Down?"

In the precious metals market, fundamental analysis is mainly used to explain long-term direction and macro logic. It doesn't focus on "should I trade today?" but rather on "where do precious metals stand economically in the current macro environment?"

For gold, fundamental analysis typically focuses on these core variables:

• First, inflation and inflation expectations, as gold is often seen as a reflection of changes in currency purchasing power.
• Second, interest rates and real interest rates, because gold itself does not yield interest, making the cost of capital crucial.
• Third, the strength of the US dollar, since gold is priced in US dollars, meaning dollar shifts directly impact price performance.
• Fourth, macro uncertainty and safe-haven demand, such as financial crises or geopolitical conflicts.
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For silver, fundamentals also require looking at industrial demand, economic cycles, and manufacturing activity levels. Therefore, the core function of fundamental analysis in precious metals is to build a reasonable macro hypothesis, helping investors judge whether the current environment generally supports or pressures precious metals.

The Problems Solved by Fundamental Analysis and Its Limits

Fundamental analysis is great at solving directional and structural questions. It can tell us why gold performs strongly overall in certain years, or why it faces prolonged pressure in other phases.

However, fundamental analysis has clear limitations:

• It rarely gives specific timing.
• Macro logic often takes a long time to reflect in prices.
• Markets can deviate from fundamentals in the short term.

As a result, if you only rely on fundamental analysis, it is easy to fall into the trap of being "logically correct, but the price isn't moving, or is even moving against you."

Technical Analysis: Answering "How Is the Market Pricing This Information?"

If fundamental analysis focuses on economic reality, technical analysis focuses on market behavior itself. Technical analysis doesn't try to judge whether a macro logic is right or wrong. Instead, it looks at how the price has behaved under the combined influence of all information, expectations, and market sentiment.

In precious metals, technical analysis mainly addresses the following questions:

• First, is the market currently trending or ranging (moving sideways)?
• Second, is the price relatively high, low, or in a neutral zone?
• Third, is the behavior of market participants shifting?
• Fourth, have key price levels been repeatedly tested and verified by the market?

In other words, technical analysis in precious metals is like a visualization tool for market sentiment and expectations.

Conclusion

In summary, fundamental analysis and technical analysis are not rivals in the precious metals market; they are analytical tools that serve different purposes. Fundamental analysis helps us understand why the market might move in a certain direction, while technical analysis helps us see whether the market is actually expressing that expectation through price.

Only after clarifying the specific problems each method solves can you build a more rational and complete framework for precious metals analysis.