After experiencing a significant decline, international gold and silver prices rebounded and turned positive during the early trading session on February 3. The main domestic Shanghai gold futures contract also recovered somewhat, narrowing its losses, although the main Shanghai silver futures contract continued to fall sharply.
As of the time of writing, the spot price of gold in London had bounced back from a low of $4,402.06 per ounce on February 2 to above $4,700 per ounce, marking an increase of over 2%. The spot price of silver in London rose to above $82 per ounce, climbing nearly 4%.
From the perspective of the domestic futures market, the main Shanghai gold futures contract opened sharply higher during the early session on February 3, briefly turning positive before experiencing some pullback. As of writing, its decline had narrowed to over 1%. After consecutive limit-down moves during both the day and night sessions on February 2, the main Shanghai silver futures contract opened without hitting the limit-down on the 3rd but remained under heavy pressure, still showing a significant decline of over 19% at the time of writing.
Does the rebound in international gold and silver prices signal that the correction is coming to an end, and will the "chain reaction" impact suffered by the domestic market also conclude?
In response, Cheng Xiaoyong, General Manager Assistant and Director of the Research Institute at Huawen Futures, stated that the correction in gold and silver prices is largely complete, and the domestic market is expected to stabilize soon. He suggested that prices would likely fluctuate within a range going forward, awaiting new positive catalysts.
"Short-term, gold and silver have completed a retest of the 60-day moving average, significantly reducing the risk of further declines. However, considering that implied volatility remains at elevated levels, consolidation and volatility are likely to be the main themes in the near term," added Xia Yingying, Head of the Precious Metals and New Energy Research Group at Nanhua Futures.
Wang Yanqing, Chief Analyst of Precious Metals at CITIC Securities Futures, holds a different view, believing that there are no signals yet indicating the end of the correction. "It is likely to remain volatile for some time, as only three days have passed since the correction began, and the market is still in a fluctuating process," Wang stated.
Compared to the main Shanghai gold futures contract, the main Shanghai silver futures contract is still falling sharply. Regarding this, Wang Yanqing believes that the subsequent decline for the main silver contract will likely narrow, as high volatility is not a常态.
Cheng Xiaoyong also noted that the characteristics and drivers of gold and silver price movements differ, leading to varying magnitudes of correction. He provided three reasons: Firstly, the overall increase in silver prices last year exceeded that of gold, with COMEX silver surging nearly 130% compared to a 55.5% rise for COMEX gold. Such rapid gains are more prone to attract retail investors chasing the rally, and once prices adjust, they can trigger extreme panic. Secondly, while the common driver for both gold and silver's rise stems from investment demand under loose monetary conditions, silver's ascent is additionally supported by a physical supply deficit, though its monetary and safe-haven attributes are weaker than gold's. Thirdly, historical experience shows that silver's volatility far exceeds that of gold, whether in bull or bear markets.
"However, judging from the gold-silver ratio, this indicator has already fallen below 60 after the sharp declines last Friday and this Monday, reaching a historically low level. This suggests limited further downside for silver. Growth in photovoltaic demand for silver will continue to provide support, making it relatively resilient. The current adjustment may be squeezing out excessive speculative froth," Cheng Xiaoyong said.
From a medium- to long-term perspective, Xia Yingying believes that the current phased adjustment in gold and silver does not alter their long-term upward trend. Instead, it offers a quality opportunity for long-term bullish investors to add to their positions. From a technical standpoint, strong support for gold lies at the 60-day moving average around $4,450 per ounce. For silver, given the high volatility environment, support near the 60-day moving average around $71 per ounce should be monitored. Operationally, it is recommended that investors consider adding long positions gradually on dips while maintaining strict position control due to the high volatility environment.