Spot gold edged higher, retreating above $4,100 per ounce, up about 0.51% and currently trading around $4,120. Earlier in the day, gold prices dipped to around $4,066 per ounce. Spot silver also edged higher, breaking above $49 per ounce, up about 1.57% and currently trading around $49.20.
Gold and silver prices plummeted on Tuesday, posting their biggest single-day declines in five and four years, respectively. However, one market analyst stated that despite short-term fluctuations, factors contributing to economic overheating remain.
The ongoing US government shutdown and geopolitical tensions are supporting gold and silver prices, which are seen as safe havens in uncertain times. Expectations of further interest rate cuts from the Federal Reserve are also supporting precious metals prices.
Following the plunge in gold and silver, overbought pressures have eased somewhat, but allocations remain undervalued.
Ole Hansen, head of commodity strategy at Saxo Bank, said gold and silver prices are experiencing a long-overdue correction, with silver’s sharp decline highlighting the liquidity gap between the two metals. However, both metals remain underrepresented in portfolios, and the structural factors driving their gains remain intact.
“While exceptionally strong pre-Diwali demand (in India) has supported gold prices, the risk of a pullback in both gold and silver has indeed increased in recent days,” Hansen said Thursday. “However, a combination of a significant technical overbought bounce, renewed risk appetite in the equity market, a stronger dollar, and generally weaker physical demand in Asia post-Diwali has led traders to become more cautious and more inclined to lock in profits.”
He noted that while the specific trigger for Tuesday’s sharp sell-off remains unclear, gold’s three failed attempts to break through $4,380 “may have shifted the mindset of precious metals traders from greed to fear.” “
Hansen analyzed: “A classic bull market scenario ensued: leveraged traders focused on technical analysis collectively liquidated their positions, while new buyers panic-sold after discovering their holdings had fallen below their cost price, instantly squeezing out the narrow exit channel. The latest market trends further demonstrate the significant liquidity disparity between gold and silver—silver’s liquidity growth is only one-ninth of the massive gains. Any profit-taking could trigger disproportionate volatility.”
He noted that while the specific trigger for Tuesday’s sharp sell-off remains unclear, gold’s three failed attempts to break through $4,380 “may have shifted the mindset of precious metals traders from greed to fear.” “
Hansen analyzed: “What followed was a classic bull market scenario: leveraged traders focused on technical analysis liquidated their positions en masse, while new buyers panic-sold after discovering their holdings had fallen below their cost price, instantly squeezing out the narrow exit channel. The latest market action once again demonstrated the significant liquidity difference between gold and silver—silver’s liquidity is only about one-ninth of that of gold.”
He pointed out that both gold and silver rebounded on Wednesday after experiencing a plunge rarely seen in years. Hansen said: “This sharp pullback indicates that after nine consecutive weeks of gains (gold rose 31% and silver rose 45%), unilateral bullish market sentiment led to a technical price correction. As mentioned earlier, in addition to the strengthening US dollar, weakening demand after Diwali in India was also a major catalyst. At the same time, silver rebounded from support at $47.80, while gold gained $400 above $400.
He added that the precious metals market already needed a correction to avoid the formation of a bubble that could burst more violently in the future.
Hansen “The silver market’s focus has now shifted to the upcoming U.S. Section 232 investigation into imports of critical minerals such as silver, platinum, and palladium – a ruling that could reshape short-term supply chains and price dynamics on both sides of the Atlantic,” the report said. “A zero-tariff ruling would encourage more U.S. silver inventories to flow to Europe, easing supply tightness in the London market.”
Of course, imposing tariffs would have the exact opposite effect. He analyzed, “Existing US silver would become semi-stranded, exacerbating scarcity in the London market and further driving up COMEX premiums. In this scenario, silver prices could quickly retest or even break through recent highs, driven by a renewed squeeze rather than genuine demand growth.”
Hansen said Saxo Bank maintains its bullish outlook for gold and silver prices through 2026.
He predicted, “Following this much-needed pullback/consolidation, traders are likely to wait and see until they are certain the core drivers of this year’s historic rally have not dissipated. These factors will continue to support precious metals—after all, the current market has removed overbought pressures, but portfolio allocations remain undervalued. In the short term, a meeting on trade frictions would be a key risk event that determines the current correction cycle.”
Silver sells off sharply, but supply shortages point to higher prices.
Robert Minter, director of investment strategy at Abrdn ETFs, told Kitco News that despite the sharpness of Tuesday’s sell-off, it helped to ease overbought conditions in gold and silver.
Minter said that if you were bullish on gold and silver last week when prices were unsustainable, you should be bullish on them now, as their markets are healthier. At the same time, Minter said precious metals investors should be willing to accept higher volatility, especially for silver, which he expects to continue facing severe supply shortages.
Minter noted that the silver market has been facing severe supply shortages for the past four years due to growing industrial demand, but it will take time for above-ground inventories to be depleted. The market has reached a point where physical metal cannot meet immediate demand.
Minter said that silver has been in severe supply shortages for years, but no one seemed concerned. However, we can see that prices were only beginning to consolidate at the beginning of this year.
Given market conditions, Minter said the rapid appreciation of silver prices should not be surprising. Nor should we be surprised to see some investors taking profits at this level. Silver prices have experienced significant volatility this year, as the global trade war and the threat of US tariffs have put significant pressure on the market.
At the beginning of the year, a large amount of silver flowed into the US, prompting market participants and bullion traders to stockpile silver to avoid potential tariffs.
These inventories have hurt the physical market in London, and unprecedented investment demand in recent weeks has completely depleted available inventory, pushing lease rates to historic highs and driving up the premium between spot and futures prices. Minter said he doesn’t expect market volatility to subside soon. He said there isn’t enough silver to meet demand from all the different markets. But he doesn’t know what will change that situation. He believes the amount of recycled silver isn’t enough to meet demand.
Minter noted that despite increased demand, silver mine supply has fallen 8.8% since 2016. “The question is how do we significantly increase mine supply? That requires higher prices, but it requires much more than that,” he said. He believes no silver miner wants to increase production, but they are constrained. A new mine takes at least 10 years to come online. Overall, Minter said the silver market’s problems won’t be resolved anytime soon.
