Gold and silver rally as dip buyers crowd in following slump

SINGAPORE – Gold advanced along with silver on Feb 3, as dip buyers crowded into precious metals following an abrupt unwinding of a record-breaking rally.

Spot gold rose as much as 6 per cent to near US$4,940 an ounce, after falling 4.8 per cent on Feb 2 to extend a slump on Jan 30 that was the steepest in more than a decade. Silver jumped more than 10 per cent – taking it back above US$87 an ounce – as a risk-on tone returned to wider markets and the US dollar fell. 

Precious metals had retreated from record highs in moves that followed a slew of warnings from market watchers that the advances, especially for silver, had been too large and too swift. Ahead of that, the metals’ climb had been underpinned by renewed concerns about geopolitical upheaval, currency debasement and threats to the US Federal Reserve’s independence.

“The foundations supporting gold today are largely unchanged from those that prevailed prior to the correction,” market strategist Ahmad Assiri of Pepperstone Group said, referring to geopolitical risks, expectations for easier monetary policy, and the metal’s role as a diversifier in portfolios.

“That said, volatility is likely to remain heightened in the near term as markets continue to digest the recent dislocation and reassess risk appetite,” he added.

Some banks have backed gold to recover, with Deutsche Bank saying in a note on Feb 2 that it was standing by a forecast for bullion to rally to US$6,000 in 2026.

The extent to which Chinese investors buy the dip will play a role in determining the direction of the market.

Last weekend, buyers flocked to the country’s biggest bullion marketplace in Shenzhen to stock up on jewellery and bars ahead of Chinese New Year. China’s markets will be closed for just over a week from Feb 16 for the break. The country’s major state-owned banks, meanwhile, are tightening controls on gold investments to manage volatility. 

At 4.18pm in Singapore, gold was up 5.8 per cent to US$4,933.16 an ounce. Silver had risen 10 per cent to US$87.45. Platinum and palladium both climbed more than 3 per cent.

The Bloomberg Dollar Spot Index, a gauge of the US currency, edged down 0.2 per cent after ending the previous session up 0.3 per cent. A lower dollar makes precious metals less expensive for most buyers.

“Both the violent sell-off and equally sharp recovery underscore a hypersensitive market driven by abrupt, headline-led emotion rather than clear direction, leaving sharp and uncomfortable volatility as the near-term norm,” said analyst Hebe Chen of Vantage Markets in Melbourne. BLOOMBERG