Gold Rebounds, Breaking Through $5,000! Dip Buyers Swoop After Historic Crash
Gold prices rose for the second consecutive day, breaking through $5,000/oz, after a sharp drop from record highs last week. This increase occurred because many market participants saw yesterday's decline as a "discount" too attractive to pass up.
On Wednesday, gold rallied as much as 2.6%, continuing its rally after the previous session's surge of more than 6%. The return of risk-on market sentiment and a weakening US dollar also fueled gold's recovery.
Despite the strong rebound, gold remains about 10% below its all-time high (January 29). However, year-to-date, gold is still up about 17%—meaning this year's major trend is still strong, only being "cleaned out" by extreme volatility.
According to TD Securities, forced selling pressure in the precious metal has likely subsided. However, the high volatility of the past few days could cause some retail investors to stay on the sidelines, so price movements remain potentially wild.
The background: Last month's precious metals rally was fueled by speculation, geopolitical risks, and concerns about the independence of the US central bank. But many warned that the rally was too fast and too large—and ultimately "exploded" into a correction, with silver posting its biggest daily drop and gold its deepest since 2013.
One of the drivers of market fragility was the buildup of large positions: Chinese funds and Western retail investors flocked to the market, fueled by leveraged products and a surge in call options. In fact, the four largest gold ETFs in mainland China reportedly experienced combined outflows of nearly $1 billion in a single day—a sign of shaken investor confidence.
Looking ahead, volatility is expected to remain high. Bank of America believes gold has a stronger "long-term thesis" than silver. Meanwhile, Deutsche Bank remains confident in its $6,000/oz target, and Goldman Sachs sees significant upside risk to its projections. As of the last update in Singapore, gold was around $5,072/oz, silver around $87.99, with the Bloomberg Dollar Index relatively stable after earlier weakening.
5 key points :
- Gold rebounded above $5,000/oz due to dip buying.
- The recovery was supported by risk-on sentiment and a weaker US dollar.
- Despite the rise, gold is still ~10% below its January 29th high, but up ~17% year-to-date.
- The crash was triggered by piling up speculative/leveraged positions and extreme volatility (silver's historic fall).
- Outlook: Volatility remains high, but major banks still see room to rise (DB $6,000; GS sees upside risk). (asd)
Source: Newsmaker.id
