Gold and Silver Rebound Sharply After Historic Sell-Off, Analysts See More Gains Ahead

Gold prices jumped more than 5 per cent on Tuesday, putting the metal on pace for its strongest single-day performance since November 2008, while silver also rallied sharply as precious metals rebounded from their steepest two-day decline in decades. Market analysts say the recovery may have further to run, with expectations that both metals could reach new record highs later this year.

Spot gold rose 5.8 per cent to $4,935.56 an ounce by 0818 GMT. The move followed a sharp sell-off that saw gold fall to $4,403.24 on Monday, just two sessions after it had reached a peak of $5,594.82. U.S. gold futures for April delivery climbed even more aggressively, gaining 6.6 per cent to trade at $4,958.50 per ounce.

“It’s a reasonable call that this is somewhere around fair value potentially, if you consider that we saw a market behaving fairly irrationally for a few weeks there,” said Kyle Rodda, a senior market analyst at Capital.com. “The current prices take gold and silver back to where they were, early in the second half of January.”

The rebound comes after an extraordinary rally earlier this year that saw gold smash through multiple record levels and post a nearly 13 per cent gain in January, marking its strongest monthly performance since November 2009. Silver also surged to unprecedented heights during that run, touching an all-time high of $121.64 last Thursday before the market reversed sharply.

On Tuesday, silver jumped 10 per cent to $87.40 an ounce, recovering some of the ground lost after an historic collapse late last week. The metal suffered its largest single-day drop on record on Friday, plunging 27 per cent, followed by an additional 6 per cent decline on Monday.

The sharp downturn in precious metals was triggered by political and policy developments in the United States. Prices slid after U.S. President Donald Trump nominated Kevin Warsh to serve as the next chair of the U.S. Federal Reserve, a move that markets interpreted as supportive of the dollar. “The markets endorsed Warsh’s nomination by U.S. President Donald Trump as someone relatively credible, and so we saw the dollar move on that basis, and again, that was kind of like the pin that popped the big precious metals,” Rodda said.

Adding to the volatility, CME Group raised margin requirements on precious metals futures, a step that intensified last week’s sharp sell-off across the sector.

Meanwhile, macroeconomic uncertainty remains elevated. The U.S. Bureau of Labor Statistics announced on Monday that the closely watched January employment report will not be released this Friday due to a partial shutdown of the federal government, removing a key data point that traders typically use to gauge the outlook for interest rates.

Other precious metals also posted solid gains. Spot platinum climbed 5.7 per cent to $2,242.55 an ounce, after having reached a record high of $2,918.80 on January 26. Palladium rose 5.3 per cent to $1,811.39, joining the broader recovery across the metals complex as investors reassessed valuations following last week’s turmoil.

By fLEXI tEAM