Gold rose again alongside silver in Tuesday’s trading as buyers rushed to purchase precious metals following a historic decline recorded at the end of the week, also supported by rising demand from China.
The spot selling price of gold jumped 6% to $4,940 per ounce on Wednesday, after a decline recorded in the previous session. Silver rose more than 9% during today’s session, surpassing $87 per ounce, amid renewed risk appetite in the markets and a decline in the US dollar.
It is worth noting that precious metal prices had retreated from their highest recorded levels following a series of warnings from market watchers that the gains, especially for silver, were too large and rapid.
Constant factors supporting the rise of gold
In this regard, it was noted: “The fundamentals supporting gold today have not changed significantly from those prevailing before the correction,” referring to geopolitical risks, expectations of monetary policy easing, and the metal’s role as a diversification factor in investment portfolios.
It was added: “That fragility is likely to persist in the short term, as markets try to digest the recent turmoil in the precious metals market.”
Gold approaches $6,000
Some global banks expected gold prices to recover and rise again. Analysts on Monday predicted that gold prices would rise to exceed $6,000 per ounce in the near term.
The 14-day Relative Strength Index for gold, one of the metrics that determines whether an asset is considered overbought or oversold, reached 54 points on Tuesday. The index had exceeded 90 points last Wednesday, well above the 70-point level that might indicate the gains were too rapid and could reverse at some point.
Rising demand from China
Precious metal prices, especially gold and silver, are also supported by high demand from China, where purchases by Chinese investors play a role in determining market direction.
Chinese markets recorded a sharp buying frenzy over the past weekend coinciding with a historic decline in gold prices, as buyers rushed to stock up on jewelry and bullion in preparation for the Lunar New Year.
Commenting on the situation, it was predicted that gold would resume its gradual ascent but in a more moderate manner, with the fundamental factors that drove its rise in the first place remaining in place.
It was stated: “Gold’s three-day decline was an expected correction, but the fundamental factors that contributed to its rise over the years are still present, making a sustained decline in precious metals unlikely.”
It was added: “Given the exclusion of rapid global monetary policy tightening and the persistence of geopolitical concerns, a more moderate, gradual rise for precious metals appears most likely.”
