(Kitco News) - After last week’s sharp selloff, gold and silver have been trying to find some stability as prices remain volatile and below critical resistance levels. While analysts see elevated downside risks in the near term, there remains significant confidence that the fundamental drivers of long-term trends are still in place.
The optimistic outlook comes even as volatility in the precious metals market remains extreme. Gold just logged its second-largest weekly trading range in recent history, surpassed only by last week’s historic rout. The price action has produced one of the most disorderly stretches of daily trading in years, with Monday’s follow-through selling delivering a 10.84% intraday plunge from session highs to lows near $4,400 an ounce.
Throughout the turbulence, gold has failed to hold gains above $5,000. Spot gold last traded at $4,651.10 an ounce, up more than 3% on the day. Meanwhile, gold prices are up 1% from last Friday.
Meanwhile, silver is exhibiting even more dramatic swings. On Thursday, the metal posted a staggering 27.8% intraday range—a sharp contrast to the slightly above 2% moves that typically characterize a normal trading day over the past six years.
Spot silver has been unable to hold gains above $90 an ounce. Despite heavy selling early Friday, silver prices last traded at $77 an ounce, up more than 8% on the day. Despite some buying ahead of the weekend, silver prices are down more than 9% for the week.
Barbara Lambrecht, Commodity Analyst at Commerzbank, said that market participants in the precious metals markets are still seeking guidance.
“Price fluctuations are likely to remain high for the time being. In the medium term, we consider precious metal prices to be well supported,” she said.
Michael Brown, Senior Market Analyst at Pepperstone, noted that silver’s one-month implied volatility is currently above Bitcoin’s. But while the market continues to consolidate in a wide range, Brown said that he expects dips to be bought.
“Importantly, spot managed to hold above the 50-day moving average, which suggests that momentum continues to just about favour the bulls for the time being,” he said. “I still think that the fundamental bull case is a very solid one, but would also argue that we need to see a period of sideways trading to provide reassurance that the speculative frenzy which swept the metals space has definitely blown over.”
Rania Gule, Senior Market Analyst at XS.com, said that the volatility in gold and silver reflects deep uncertainty among investors, driven by fears of inflation and recession, shifting expectations around monetary policy, and escalating geopolitical risks.
Although gold prices could remain below $5,000 an ounce in the near term, Gule said that there is still a path to $6,000 by year-end.
“The market has not yet exhausted its bullish drivers. However, investors have become more selective and cautious, meaning that future advances are likely to be less impulsive, punctuated by corrections, and more fundamentally driven rather than purely momentum- or speculation-based,” she said. “The precious metals market is currently undergoing a phase of repositioning rather than a trend reversal. The present consolidation reflects investor caution after a strong rally, while simultaneously confirming the robustness of the price base for both gold and silver.”
Nick Cawley, Market Analyst at Solomon Global, said that he sees the current volatility as short-term noise.
“I expect $5k to be broken again in the next couple of weeks, and a re-test of the multi-decade $5.6k to happen in Q2. Market shakeouts are healthy, especially after strong rallies, and the technical outlook remains positive,” he said. “Tailwinds remain, and while the U.S. dollar may be firm at the moment, over the coming months, rate cuts will weaken the greenback, or at the very least halt any further move higher.”
Aaron Hill, Chief Market Analyst at FP Markets, said that as volatility settles, he sees prices trading in a range between $4,700 and $5,000 an ounce.
“In the short term, downside risks are slightly higher because a lot of good news is already priced in after last week’s rally. For gold to turn clearly bullish again, it probably needs a fresh trigger like weaker economic data, clearer rate cuts, or new geopolitical tension,” he said.
Naeem Aslam, Chief Investment Officer at Zaye Capital Markets, said that he could see gold prices drop to $3,800 an ounce as the metal finds a new bottom. However, he still sees an opportunity to buy even at current levels.
“At current levels, it would make sense to utilise some of your dry powder --- after all, the prices are well below their all-time high and it is very much given that this year’s ATH will be much higher than the current one,” he said.
Although there is still robust optimism in the marketplace, analysts have said that investors should expect volatility to remain elevated next week as markets navigate delayed employment data and inflation numbers.
These are the two key metrics the Federal Reserve is watching as it maintains its neutral monetary policy. The central bank has been reluctant to cut interest rates as inflation has remained stubbornly elevated and the labor market has been relatively healthy.
Currently, markets are expecting the Federal Reserve to restart its easing cycle in June, and economic data that delays that resumption could be negative for gold.
Outside of the U.S., market players will be paying close attention to Japan’s upcoming election. The results could signal a meaningful shift toward looser fiscal policy, including tax cuts and higher government spending, at a time when Japan already carries one of the world’s heaviest public debt loads. Market analysts have said that a more expansionary policy stance could pressure Japanese government bonds, weaken the yen, and complicate the Bank of Japan’s efforts to normalize monetary policy.
Analysts have said that gold could see renewed global demand as investors seek protection from global currency debasement and growing concerns over sovereign debt sustainability.
Economic data to watch next week
Sunday: Japanese election
Tuesday: US Retail Sales
Wednesday: US Nonfarm Payrolls
Thursday: US weekly jobless claims; US Existing Home Sales
Friday: US CPI
