Gold and silver prices rebounded on Tuesday following a historic sell-off. Analysts pointed out that the recent sharp adjustment was more about positioning changes rather than the beginning of a sustained downturn.
After Monday's decline and last Friday's near 10% drop—the most severe single-day loss in decades—spot gold prices began to recoup losses. Silver's performance was equally striking, achieving a modest recovery on Tuesday after plummeting approximately 30% on Friday, its worst single-day performance since 1980.
During Tuesday's session, spot gold surged as much as 4%, ultimately trading steadily above $4,771.76 per ounce with a gain of over 2%. New York gold futures closed up 3%, settling around $4,791 per ounce. Spot silver soared up to 7.8%, finishing the day up 2.6% at $81.3 per ounce, while New York silver futures advanced 7% to $82.67 per ounce.
This recovery comes as investors reassess whether the crash represents a structural turning point or an overreaction to short-term catalysts.
Strategists at Deutsche Bank indicated that historical experience suggests this is more likely due to short-term catalysts, although the scale of the sell-off has raised new questions about market positioning. The bank noted that while signs of speculative activity have been accumulating for months, this alone is insufficient to justify the intensity of last week's volatility.
Deutsche Bank argued, "The adjustment in precious metal prices has exceeded the significance of their apparent catalysts. Furthermore, the investment appetite from official, institutional, and individual investors has likely not deteriorated."
The sell-off was triggered by a combination of factors, including a rebound in the US dollar, shifting market expectations for Federal Reserve leadership following Donald Trump's nomination of Kevin Warsh for the next chair, and position squaring ahead of the weekend.
However, Deutsche Bank emphasized that the overall investment thesis for gold and silver remains valid: "The thematic drivers for gold are still positive. Conditions for a sustained reversal in gold prices are not currently present, and the current environment is fundamentally different from the weak gold price backgrounds of the 1980s or 2013."
Barclays expressed a similar view, acknowledging that technical indicators were overheated and positions were overly crowded, but maintained that buying interest in gold remains resilient due to themes of geopolitical and policy uncertainty, as well as reserve asset diversification.
Silver's extreme volatility reflects its smaller market size, higher inherent volatility, and greater retail participation. Nevertheless, some analysts remain optimistic about the white metal.
Mike Cudzil, a market analyst at eToro, stated, "Speculative positioning certainly played a role in the short term. Silver attracts more retail participation than gold, making it more sensitive to sentiment shifts and short-term trading." However, he added that blaming all the volatility on speculation is "an oversimplification." Silver has genuine industrial demand, particularly in sectors related to data centers and artificial intelligence (AI) infrastructure.
A study released in January predicted a surge in global silver demand this decade, driven by the solar photovoltaic industry and the transition to more efficient battery technologies. Total annual demand is forecast to reach between 48,000 and 54,000 tonnes by 2030, while supply is expected to grow only to around 34,000 tonnes, implying that only 62% to 70% of demand could be met.
The solar industry alone is projected to consume 10,000 to 14,000 tonnes annually, accounting for 41% of global supply. Analysts noted that these fundamental demand factors have not disappeared; the current volatility is merely silver's characteristic tendency to "overshoot" during strong upward phases.
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