Gold Rebounds Sharply After Historic Plunge, Chinese Buyers Step In
(Market Watch) -- Gold and silver prices bounced back with force on Tuesday, attempting to stabilize after a violent reversal last week wiped out billions in market value and rattled investors worldwide. The dramatic swings have turned the spotlight onto physical buyers in China, who are now seen as a crucial stabilizing force.
Spot gold surged as much as 4.2% to over $4,855 an ounce, a partial recovery after Monday's 4.8% drop. That decline extended Friday's brutal sell-off, which marked the metal's steepest single-day fall in over a decade. Silver, known for its even wilder volatility, jumped up to 8.1% to surpass $85 an ounce, following its own dramatic slide.
The precious metals complex had been on a seemingly unstoppable tear last month, soaring to record highs on a potent mix of geopolitical anxiety, currency concerns, and speculative fervor. Chinese investors, in particular, poured into the rally, amplifying gains until a sharp rebound in the U.S. dollar triggered a massive and rapid unwind.
Analysts say the market's immediate trajectory may now hinge on whether Chinese retail investors view the price drop as a buying opportunity. Over the weekend, crowds descended upon Shenzhen's massive bullion market—a key barometer of Chinese retail demand—to purchase gold jewelry and bars ahead of the Lunar New Year holidays. With domestic markets set to close for over a week starting February 16th, this pre-holiday buying window is critical. In response to the extreme volatility, several of China's state-owned banks have begun tightening controls on gold-related investment products.
"The fundamental drivers for gold—macro uncertainty and demand for alternatives—haven't vanished overnight," said Ahmad Assiri, a market strategist at Pepperstone Group Ltd. "However, we're in for a period of elevated volatility as the market finds a new equilibrium and participants recalibrate their risk tolerance."
Some institutional voices remain bullish despite the chaos. Deutsche Bank AG reiterated its forecast for gold to rally toward $6,000 an ounce in a note to clients, suggesting the long-term thesis remains intact.
Geopolitics also remain in focus. Investors are monitoring potential diplomatic talks between the U.S. and Iran, as any breakthrough that eases tensions could reduce demand for gold's traditional safe-haven appeal and add downward pressure on prices.
As of late morning in Singapore, spot gold was up 3.2% at $4,808.63 an ounce. Silver gained 6.1% to $83.1, while platinum and palladium also traded higher. The U.S. dollar, whose strength catalyzed the initial sell-off, edged slightly lower.
Market Voices: Reactions to the Rollercoaster
Michael Chen, Portfolio Manager in Hong Kong: "This is a healthy correction in an overheated market. The structural reasons to hold gold haven't changed. For long-term investors, this volatility creates entry points. The key question is whether the speculative froth has been fully cleared."
Sarah Wilkinson, Retail Investor from London: "It's absolutely terrifying. One day you're looking at record highs, the next you're down double-digits. It makes you question everything you think you know about 'safe' assets. I've moved a chunk of my holding to cash until the dust settles."
David Rossi, Independent Trader commenting online: "This is pure manipulation and a warning sign. The speed of the crash shows how fragile these 'record highs' were, built on leverage and herd mentality, not real value. The so-called 'rebound' is a dead cat bounce before the next leg down. Central banks and big funds are playing a dangerous game."
Li Wei, Shop Owner at Shenzhen Gold Market: "The store was packed over the weekend. People weren't scared by the price drop on the news; they saw it as a discount for the New Year. For many here, buying gold is a tradition, not just an investment. The physical demand is very real."