Gold and Silver Prices Stage Significant Rebound After Historic Crash
In a dramatic turn of events, both gold and silver prices witnessed a substantial recovery on Monday, following their most severe single-day collapse in over four decades. This remarkable rebound comes after precious metals experienced an unprecedented sell-off that left market participants stunned.
Monday's Recovery: A Technical Bounce
Spot gold managed to recover up to 1% during Asian trading hours, after plunging approximately 4% earlier in the morning session. Meanwhile, spot silver demonstrated an even more impressive resurgence, rebounding over 8% to reach $84.140 per ounce. This recovery followed a brief but sharp decline of nearly 12% for the white metal.
This volatility marks a significant chapter in what has been an extraordinary year for precious metals. Over the past twelve months, both gold and silver have surged to record-breaking levels, defying expectations and surprising even seasoned market veterans. The upward momentum gained considerable strength in January as investors increasingly turned to these traditional safe-haven assets.
What Triggered the Historic Sell-Off?
According to Kaynat Chainwala, AVP of Commodity Research at Kotak Securities, gold and silver suffered their steepest single-day decline since 1980 on Friday. Gold settled at $4,864 per ounce while silver closed at $84.66 per ounce. Chainwala identified three primary catalysts for this dramatic sell-off:
- A sharp rebound in the U.S. dollar's strength
- Broad-based weakness across global financial markets
- The Trump administration's nomination of Kevin Warsh, widely perceived as an inflation hawk, as the next Federal Reserve chair
"The brutal correction followed an exceptional rally," Chainwala explained. "Spot gold had surged to a fresh all-time high of $5,597 per ounce on Thursday, while silver peaked at $121.6 per ounce, buoyed by a softer dollar and persistent geopolitical tensions."
Chainwala further noted that silver experienced a deeper correction due to its higher inherent volatility, exposure to industrial demand fluctuations, and potentially from CME's margin hike announcement on Wednesday, January 28th. This adjustment raised non-heightened margin requirements from 9% to 11% and heightened requirements from 9.9% to 12.1%.
Market Mechanics and Investor Behavior
Goldman Sachs, as quoted by Bloomberg, highlighted another significant factor contributing to the precious metals' extraordinary rally. The investment bank pointed to a record surge in call-option buying, which grants investors the right to purchase assets at predetermined prices. This activity "mechanically reinforced upward price momentum" as option sellers hedged their rising exposure by purchasing more of the underlying assets.
Expert Perspectives on Future Trajectories
Akshat Garg, Head of Research & Product at Choice Wealth, offered his analysis of the current market situation. "Both precious metals had run up sharply over the last year, and what we're seeing now is a mix of profit-booking, global volatility and reaction to macro cues," he stated.
Garg provided crucial advice for investors navigating this turbulent period: "For investors, this isn't a moment for panic. Gold and silver are portfolio hedges, not trading bets. If your allocation is sensible, staying put makes sense. If anything, staggered buying during corrections works better than chasing rallies. Volatility hurts emotions, not long-term plans."
Technical Analysis: Gold's Outlook
Ponmudi R, CEO of Enrich Money, provided detailed technical perspectives on both metals. Regarding gold, he noted that the precious metal has experienced a sharp multi-session correction from recent peaks above $5,480–$5,626, falling nearly 16% to trade around $4,745–$4,887 after testing intraday lows near $4,700.
"The move featured exhaustion patterns like spinning tops and reversal candles, triggering panic selling amid overbought conditions," Ponmudi explained. "Prices now consolidate in the $4,740–$4,760 zone, where prior breakout levels, the 20-day EMA, and converging supports align providing a robust technical floor."
He identified the 50-day EMA near $4,500–$4,533 as offering deeper cushioning, while noting that the multi-year ascending channel and slope support limit further downside. "As long as prices hold above $4,700, the bullish structure remains valid, with recovery potential toward $4,800–$5,000+ on renewed safe-haven demand or momentum recovery. A decisive break below $4,500 would be needed to challenge the broader uptrend."
Technical Analysis: Silver's Volatile Path
Regarding silver, Ponmudi observed even more extreme volatility, with the metal plunging nearly 40% from highs above $118–$121 to around $74–$85, with lows near $74.
"This outsized correction aligns with historical late-stage bull phase shakeouts, but silver's hybrid monetary-industrial profile continues to underpin the outlook amid persistent supply tightness and demand growth," he stated.
Ponmudi identified the $74–$70 zone, aligning with the 50-day EMA, as forming critical demand support. "Stability above this base could facilitate a rebound toward $82–$92–$100+ as industrial tailwinds re-emerge and momentum rebuilds. The ascending channel remains supportive on shallow pullbacks."
Disclaimer: This analysis is for educational purposes only. The views and recommendations presented are those of individual analysts or broking companies, not Mint. Investors are advised to consult with certified experts before making any investment decisions.
