Gold rebounds… “biggest daily gain since the 2008 financial crisis”

After a recent sharp selloff, international gold prices are rebounding strongly.

Reuters reported that as of 3:31 a.m. Korea time on the 4th, the international spot gold price rose 5.2% from the previous session to $4,906.82 per ounce, and was poised to post its biggest one-day gain since November 2008, shortly after the global financial crisis. As of 8:50 a.m. on the 4th, spot gold was trading at $4,941.55 per ounce.

While it is up sharply compared with $4,403.24 on the 2nd, Reuters noted it remains well below last week’s peak of $5,594.82.

April-delivery gold futures ended trading on the 3rd at $4,935 per ounce, up 6.1% from the previous session, and stood at $4,965.00 as of 8:50 a.m. on the 4th.

In an interview with Reuters, Peter Grant, vice president and senior metals strategist at precious-metals brokerage Zaner Metals, said the recent price decline was a technical correction within a long-term uptrend, adding that underlying fundamentals supporting higher gold prices remain solid.

He said gold is likely to remain in a consolidation phase for the time being, projecting support at $4,400 per ounce and resistance likely forming around $5,100.

Silver also rebounded after a steep drop. After sliding to as low as $71.3822 per ounce on the 2nd, silver was trading around $84.5462 as of 8:50 a.m. on the 4th.

Because the silver market is far smaller than gold, it is more vulnerable to price volatility. U.S. business outlet CNBC reported that there were 10 instances over the past month when silver posted price swings of more than 5%.

Gold and silver prices tumbled on the 30th of last month after news broke that former Fed Governor Kevin Warsh had been nominated as the next chair of the U.S. central bank (Fed). Warsh had been viewed as the “safest choice” among the Fed chair candidates considered by U.S. President Donald Trump. After Warsh’s nomination, the dollar rebounded, triggering a sharp pullback in gold and silver prices that had been surging.

The analysis also points to heightened volatility as speculative capital from China and leveraged funds in the West (funds that amplify and follow rising market trends) poured into the gold and silver markets.

In a recent report, UBS strategist Joni Teves said the correction would, over the longer term, help improve market health, adding that it would provide investors with an optimal opportunity to build long-term strategic positions at more attractive price levels.

Ko Jeong-sam, Hankyung.com reporter jsk@hankyung.com