Precious metals are staging a dramatic comeback. After suffering historic collapses from multi-year highs, gold and silver have rebounded sharply, luring in investors eager to buy the dip.
On Tuesday, spot gold climbed as much as 6.2% to near $4,950 an ounce, recovering from its worst rout in more than a decade. Silver soared even more, rising over 10% to trade above $87 an ounce, as a risk-on sentiment returned to global markets and the US dollar weakened. Platinum and palladium also rose roughly 5%, rounding out a broad rebound across the precious metals complex.
From Frenzy to Freefall
The surge in gold and silver last month had been extraordinary. Prices had soared under a combination of speculative momentum, geopolitical tension, and concerns over the Federal Reserve’s independence. Chinese funds and Western retail investors had amassed substantial positions, further amplified by a wave of call-options buying and leveraged ETFs, fueling a rapid run-up.
But the rally came to a sudden halt last week. Silver recorded its biggest daily drop on record, while gold tumbled the most since 2013. The selloff accelerated during Asian trading hours on Friday and spilled over into Monday, leaving traders scrambling for safe entry points.
“We think this correction will be healthy for the market in the long run,” said Joni Teves, strategist at UBS Group AG.
“This period should provide investors the opportunity to build long-term strategic positions at more attractive entry levels.”
Banks Stay Bullish on Bullion
Despite the sharp corrections, major banks remain optimistic on gold. Deutsche Bank reaffirmed its bullish call on gold, predicting a climb to $6,000 an ounce in the coming months.
Market watchers note that Chinese investor behavior will be a key driver in the near term. Over the weekend, buyers flocked to Shenzhen’s largest bullion marketplace to purchase jewelry and bars ahead of the Lunar New Year, signaling strong domestic demand. However, state-owned banks are simultaneously tightening controls on gold investments to manage market volatility.
Fundamental Drivers Still Intact
Analysts emphasize that while the plunge was severe, the underlying drivers of precious metals’ multi-year advance remain strong.
“Gold’s 3-day plunge was very much a correction waiting to happen, but the fundamental drivers for its multi-year advance are still in play,” said Garfield Reynolds, MLIV Asia Team Leader.
“With a slow global monetary tightening cycle and ongoing geopolitical concerns, a more modest grind higher for precious metals looks likely.”
The rebound comes alongside a relatively stable US dollar, with the Bloomberg Dollar Spot Index barely changing after a minor uptick of 0.3% in the previous session.
Geopolitics and Gold: The Iran Factor
Investors are closely monitoring tensions between the US and Iran, after President Donald Trump indicated that nuclear deal talks could resume in the coming days. Any breakthrough in negotiations could dampen gold’s safe-haven appeal, applying pressure to prices in the near term.
For now, however, dip buyers have returned, taking advantage of the unprecedented volatility to secure positions in gold, silver, and other precious metals. With China’s Lunar New Year approaching and geopolitical risks lingering, the metals market is set for a volatile but potentially lucrative period.
Gold Snapshot (Tuesday, London trading):
Gold: $4,923.72 (+5.6%)
Silver: $87.09 (+9.9%)
Platinum & Palladium: +5% each
As the dust settles, traders are weighing whether this bounce is a temporary relief or the beginning of a sustained recovery, with eyes on China’s buying, US-Iran diplomacy, and global monetary policy to dictate the next leg for precious metals.