Gold and Silver Stage Dramatic Recovery After Massive Selloff

TLDR

• Gold prices surged 6% to $4,930.80 per ounce while silver jumped 12% to $86.64 on Tuesday after a devastating two-day crash
• The precious metals collapse saw gold drop 13% and silver plunge 33% following Kevin Warsh’s nomination as Federal Reserve chair
• Friday’s gold decline was the steepest in over ten years, prompting widespread buying from investors seeking bargains
• Deutsche Bank analysts stand by their $6,000 gold price target despite recent market turbulence
• Major Chinese banks are imposing stricter controls on gold trading as volatility reaches extreme levels

Precious metals markets bounced back Tuesday with gold and silver posting strong gains after experiencing their worst decline in years. Gold futures climbed 6% to reach $4,930.80 per ounce. Silver futures soared 12% to $86.64 per ounce.

The rebound came after a crushing two-day period that wiped trillions of dollars from precious metals valuations. Gold had tumbled more than 13% from its Thursday record of $5,626 per ounce. Silver suffered an even worse fate, crashing 33% during the same timeframe.

The selloff began when President Trump announced Kevin Warsh as his choice for Federal Reserve chair. Market participants viewed Warsh as less dovish compared to other candidates. This perception reduced investor appetite for gold as a protective asset.

The dollar strengthened following the announcement, adding pressure to precious metals prices. On Tuesday, the greenback gave back some gains with the DXY index dropping 0.2%. This currency weakness helped fuel the recovery in gold and silver.

Historic Price Swings Rock Markets

Friday’s gold price drop represented the largest single-day fall in more than a decade. The extreme move attracted bargain hunters looking to buy at reduced levels. Silver managed to push back above $87 per ounce during Tuesday’s session.

Analysts had cautioned that the preceding rally was unsustainable. Gold’s relative-strength index had climbed above 90 last Wednesday, far exceeding the 70 threshold that suggests overheated conditions. The indicator retreated to 54 by Tuesday.

Deutsche Bank remained optimistic about gold’s long-term prospects. Analyst Michael Hsueh wrote Monday that $6,000 per ounce remains achievable. “The conditions do not appear primed for a sustained reversal in gold prices,” Hsueh stated.

Chinese Demand Critical for Direction

China’s participation in the market will heavily influence where prices head next. Shoppers crowded Shenzhen’s main gold market over the weekend buying jewelry and bars before Lunar New Year. Chinese markets shut down February 16 for more than a week.

Major Chinese banks are implementing tighter restrictions on gold investments to control volatility. The measures aim to bring stability amid wild price fluctuations. Pepperstone Group strategist Ahmad Assiri noted that gold’s fundamental support remains intact despite the correction.

Geopolitical tensions, anticipated looser monetary policy, and portfolio diversification continue to underpin demand. Assiri warned that elevated volatility will persist as markets digest recent events. Platinum and palladium both gained over 3% Tuesday.

Vantage Markets analyst Hebe Chen characterized the market as hypersensitive and emotion-driven. She described the violent selloff and sharp recovery as signs of unclear direction. The uncomfortable volatility is expected to continue short-term.

Potential progress on Iran nuclear talks could impact gold prices. President Trump indicated negotiations might occur within days. Any diplomatic breakthrough would diminish gold’s safe haven appeal and potentially pressure prices downward.

The post Gold and Silver Stage Dramatic Recovery After Massive Selloff appeared first on Blockonomi.