(Kitco News) - After their biggest collapse in recent history, gold and silver are finding their way back into the light, posting their biggest one-day gains on record.
Spot gold last traded at $4,916 an ounce, up more than 5% on the day; meanwhile, spot silver last traded at $87.82 an ounce, up 11%.
Some analysts note that the recovery in the precious metals confirms a growing consensus that the recent selling pressure is related to short-term speculative positioning and momentum rather than a fundamental shift in the marketplace.
One German bank has been fairly vocal, reiterating its bullish expectations for gold. On Monday, Michael Hsueh, Head of Metals Research at Deutsche Bank, said that although precious metals investors should be cautious as market volatility remains high, the investment case for gold remains unchanged.
Hsueh said that despite the volatility, the gold market remains on track to hit $6,000 an ounce by the end of the year.
"Gold's thematic drivers remain positive and we believe investors' rationale for gold (and precious) allocations will not have changed. The conditions do not appear primed for a sustained reversal in gold prices, and we draw some contrasts between today's circumstance and the context for gold's weakness in the 1980s and 2013,” Hsueh said in his report.
Hsueh added that Chinese investment demand will remain a key pillar of support for gold. He noted that even as Western gold prices were dropping, premiums on the Shanghai Gold Exchange remained elevated.
Deutsche isn’t the only bank maintaining a bullish outlook. On Monday, commodity analysts at Société Générale said that their fundamental outlook for the precious metals has not changed. Ipek Ozkardeskaya, market analyst at Swissquote, said that she also remains bullish on gold.
“It looks like the worst could be behind us. With leveraged speculative positions flushed out, investors may feel they are returning to a freshly cleaned playground, albeit cautiously,” she said. “The factors supporting gold prices since last year remain firmly in place: trade and geopolitical uncertainty persists; G7 debt dynamics look increasingly unsustainable and are likely to worsen — not only in the US with the ‘Big, Beautiful Bill’, but also in Japan and in Europe amid rising defence spending. Appetite for the US dollar, other major currencies, and sovereign bonds remains fragile, and that should continue to underpin the bullish case for hard commodities.”
Although prices can move higher, Ozkardeskaya added that there are growing risks in the marketplace.
“Traditionally, gold acts as protection against market risk. But it is now behaving like a risky asset — worse, at times like a meme stock — and its negative correlation with risk assets has faded. Highly speculative, leveraged positioning is largely responsible for this unusual behaviour,” she said. “The problem is that most diversified portfolios have exposure to gold, meaning this volatility affects all risk profiles. That is disquieting.”
