Gold, silver prices bounce back after historic crash
What's the story
Gold and silver prices have staged a strong comeback after a historic sell-off. The recovery comes as investors reassess whether the recent downturn was a structural turning point or an exaggerated response to short-term factors. On Tuesday, spot gold jumped as much as 4% to $4,820 per ounce while silver prices rose as much as 8% to $85. This comes after a nearly 30% crash last week, marking its worst one-day performance since 1980.
Market analysis
Deutsche Bank weighs in on market recovery
Strategists at Deutsche Bank have said that history suggests short-term catalysts are responsible for market fluctuations. They noted that while signs of elevated speculative activity have been building for months, they aren't enough to explain last week's sell-off. The bank also added that "the adjustment in precious metal prices overshot the significance of its ostensible catalysts."
Sell-off triggers
Factors behind recent market volatility
The recent sell-off was fueled by several factors, including a rebound in the US dollar and changes in expectations around Federal Reserve leadership. This was after President Donald Trump nominated Kevin Warsh as the next Fed chair. Position trimming ahead of the weekend also contributed to this market volatility.
Investment outlook
Investment case for gold and silver remains strong
Despite the recent market fluctuations, Deutsche Bank maintains that the broader investment case for gold and silver remains strong. The bank said "Gold's thematic drivers remain positive" and "we believe investors' rationale for gold (and precious) allocations will not have changed." Barclays also echoed this sentiment, saying that despite overheated technicals and stretched positioning, the broader demand for gold can remain resilient amid geopolitical uncertainties.