Bank of America stated that the markets for both precious metals will remain highly volatile following a sharp decline from their record highs.
Measured by volatility indicators, gold price volatility has reached its highest point since the peak of the 2008 financial crisis. Meanwhile, the silver market has experienced its most severe turbulence since 1980.
Last month, precious metal prices surged, extending a previously strong rally supported by speculators, geopolitical concerns, and unease about the Federal Reserve's independence. However, this came to an abrupt halt late last week, with gold suffering its largest drop in over a decade and silver posting a record single-day decline.
"We will continue to operate in an environment where volatility is above historical levels, but not to the extent seen in the past few days, unless we get another speculative bubble," said Niklas Westermark, Head of EMEA Commodities Trading at Bank of America. "The sell-off over the last two trading days, I think, has largely cleared out the market."
On Tuesday, gold rebounded along with silver as bargain hunters entered the precious metals market. Westermark noted that gold's investment case is stronger and more long-term in nature. He pointed out that price increases and market turbulence might affect position sizing, but not investors' overall interest.
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