Gold's "Rise" Is It a Rebound or a Trap?
Gold rose and pared some losses after a major rally was abruptly "broken," sending prices down 13% in just two days. Silver also rallied, signaling the market is beginning to stabilize after the extreme shock.
In the Asian session, spot gold surged as much as 4.2% to above $4,855/ounce. This came after gold fell 4.8% in the previous session, continuing Friday's sharp sell-off, which was described as the worst decline in more than a decade. Silver even rose as much as 8.1%, briefly breaking through $85, before paring its gains.
Market strategists believe the "fundamentals" supporting gold haven't changed much compared to before Friday's correction. However, volatility is likely to remain high as the market digests the price dislocation and reassesses risk appetite.
Previously, gold and silver had fallen from record levels, surprising many traders. Last month's rally was fueled by geopolitical concerns, currency depreciation, and concerns about central bank independence. Aggressive buying from Chinese speculators accelerated the rally—but reversed sharply when the US dollar rebounded. At Monday's close, gold was still about 17% below its record high of $5,595.47 (January 29), while silver was down more than a third from its peak.
The next direction will largely depend on the behavior of Chinese investors: whether they return to "buy the dip" as prices fall. Last weekend, buyers flocked to Shenzhen's major bullion market to purchase jewelry and bars ahead of the Lunar New Year. Chinese markets will also be closed for more than a week starting February 16, and local state-owned banks are reportedly tightening controls on gold investments to curb volatility.
Several banks remain optimistic about gold's recovery. Deutsche Bank reiterated its projection that gold could potentially reach $6,000/ounce. However, investors are also monitoring the situation in Iran, after Donald Trump suggested that talks on a new nuclear deal could occur within days—if diplomacy succeeds, gold's appeal as a safe haven could diminish, pressuring prices.
By midday in Singapore, gold was up about 3% at $4,799.77/ounce. Silver gained 4.6% to $82.91/ounce, while platinum and palladium also gained. The Bloomberg Dollar Index fell slightly by 0.2%, after rising 0.3% in the previous session. (asd)
Source: Newsmaker.id
