Euphoria Returns? Gold and Silver Recover After Massive Liquidation
Gold and silver prices rose sharply on Tuesday (February 3rd) as buyers capitalized on the price decline following the extreme sell-off that cut short last week's record-breaking rally. In the physical/spot market, gold briefly approached the $4.9K/oz area, and silver retraced its upward trajectory to $87/oz, indicating that buying interest emerged as liquidation pressure began to ease.
Technically, yesterday's correction was triggered by a combination of profit-taking, margin calls, and tightening margin requirements for precious metals futures contracts—which typically increase volatility when leveraged positions are "forced" to exit. Several reports have highlighted that the unwinding of speculative positions (particularly in Asia) contributed to the decline, before the market began to stabilize as the liquidation eased.
Fundamentally, the prevailing narrative driving gold has not completely disappeared: geopolitical concerns, the risk of currency depreciation, and the issue of central bank independence remain reasons for investors to hold precious metals. Consequently, some institutions are maintaining their bullish projections—for example, Deutsche Bank AG, which maintained its $6,000/oz target in its research note.
However, the market remains fragile, as this rebound occurred amid uncertainty over the dollar's direction. After briefly strengthening, the US dollar weakened slightly again; the Bloomberg Dollar Spot Index was reported to have fallen 0.2% on Tuesday, which typically helps gold/silver as commodities become relatively "cheaper" for non-dollar buyers.
The China factor is also a major concern. "Buying the dip" by retail investors in gold trading centers like Shenzhen is said to be rampant ahead of the Lunar New Year holiday, while state-owned banks in China are tightening controls on gold investments to manage volatility. How aggressively Chinese buyers return will likely determine whether the recovery continues or is just a temporary rebound.
Source: Newsmaker.id
