Gold and Silver Rebound Sharply After Historic Two-Day Selloff

TLDR

• Gold futures climbed 6% to $4,930.80 per ounce on Tuesday while silver jumped 12% to $86.64, recovering from a sharp two-day decline
• Precious metals had dropped over 13% for gold and 33% for silver after President Trump nominated Kevin Warsh as the next Federal Reserve head
• The selloff on Friday marked gold’s steepest daily decline in more than a decade, triggering dip-buying from investors
• Deutsche Bank maintained its forecast for gold to reach $6,000 per ounce despite the recent volatility
• Chinese state-owned banks are tightening controls on gold investments to manage market volatility ahead of Lunar New Year

Gold and silver prices surged on Tuesday as investors bought into precious metals following a historic decline. Gold futures rose 6% to $4,930.80 per ounce. Silver futures jumped 12% to $86.64 per ounce.

The recovery followed a brutal two-day selloff that erased trillions of dollars from precious metals markets. Gold futures had fallen more than 13% through Monday after hitting a record high of $5,626 per ounce on Thursday. Silver experienced an even steeper drop, plunging 33% over the same period.

Fed Nomination Triggers Market Shift

The sharp decline began after President Donald Trump nominated Kevin Warsh as the next Federal Reserve chair. Warsh was viewed as the least dovish among potential candidates for the position. His selection reduced demand for gold as a safe haven asset.

The nomination also triggered a rebound in the U.S. dollar, which further pressured precious metals prices. However, the dollar’s rally paused on Tuesday, with the DXY index falling 0.2% in morning trading. The weaker dollar helped support the recovery in gold and silver prices.

Friday’s gold selloff marked the steepest single-day decline for the metal in more than a decade. The dramatic move prompted investors to step in and buy at lower prices. Silver climbed back above $87 an ounce during Tuesday’s trading session.

Market watchers had warned that the previous rally in precious metals had been too large and too fast. Gold’s 14-day relative-strength index reached above 90 last Wednesday, well above the 70 level that typically signals overbought conditions. By Tuesday, the reading had fallen to 54.

Despite the recent turbulence, Deutsche Bank maintained its bullish outlook on gold. The bank’s metals analysts said in a Monday note that gold could still reach $6,000 per ounce. “Gold’s thematic drivers remain positive and we believe investors’ rationale for gold allocations will not have changed,” said analyst Michael Hsueh.

China’s Role in Price Recovery

Chinese demand will play a key role in determining gold’s direction going forward. Buyers flocked to Shenzhen’s largest bullion marketplace last weekend to purchase jewelry and bars ahead of Lunar New Year. China’s markets will close for over a week starting February 16 for the holiday break.

Chinese state-owned banks are tightening controls on gold investments to manage the increased volatility. The moves come as officials attempt to stabilize the market amid wild price swings. Ahmad Assiri, market strategist at Pepperstone Group, said the foundations supporting gold remain unchanged from before the correction.

These foundations include geopolitical risks, expectations for easier monetary policy, and gold’s role as a portfolio diversifier. However, Assiri noted that volatility will likely stay elevated in the near term. Markets continue to process the recent price dislocation.

Platinum rose more than 3% on Tuesday while palladium also gained over 3%. The broader recovery in precious metals reflected a return of risk appetite to financial markets. Analysts at Vantage Markets described the market as hypersensitive and driven by headline-led emotion rather than clear direction.

President Trump said talks over a new nuclear deal with Iran could happen in the coming days. A breakthrough in negotiations could reduce gold’s appeal as a haven asset and pressure prices lower.

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