Gold and silver extend rebound but concerns over volatility linger

Gold and silver prices extended their rally on Wednesday, with analysts saying further gains will likely be determined by the direction of foreign exchange and interest rate expectations.

Spot gold was up 2.4% at $5,054.6 per ounce as of 5:37 a.m. ET, while gold futures gained about 3.4%, to $5,1 . Meanwhile spot silver was up 5.8% $90 per ounce. Silver futures were up 8% at $90.16.

Precious metals prices have rebounded strongly after a fall of nearly 10% for gold on Friday, and a 30% collapse in silver prices that marked the metal’s worst one-day performance since 1980. 

“Gold’s rebound today reflects renewed dip buying after one of the sharpest corrections in precious metals in years, as broader markets stabilized and the US dollar softened,” Ewa Manthey, commodities strategist at ING told CNBC in an email.

The ICE U.S. Dollar Index was little changed on Wednesday at 97.382, but is down sharply from a high of 99.39 on Jan. 19.

London-listed mining companies also extended their gains. Rio Tinto was up 1% and Anglo American was trading 0.7% higher, but Antofagasta was down about 0.2%. The FTSE 350 Precious Metals and Mining Total Return Index was 2% up at about 34,963.

UBS CEO Sergio Ermotti said the bank’s clients have been more cautious of late.

“They are looking for protection, they are shying away a little bit from the tech sector lately,” Ermotti told CNBC in an interview.

“So I think it’s fair to say that excess cash is redeployed, probably in capital markets. We saw also in precious metals in the last couple of months, but broadly speaking, clients are holding up to their asset allocations,” he added.

Further gains in precious metals could be more muted, analysts said.

“While near-term volatility is likely to persist, we view this move as a positioning-driven reset rather than a structural reversal,” ING’s Manthey said.

“Over the coming weeks, the pace and sustainability of any further gains will be shaped by movements in the dollar, interest-rate expectations, and risk sentiment, with precious metals more likely to climb at a steadier pace rather than repeat the explosive rally of the past three months,” Manthey added.

Goldman Sachs has a $5,400 price target on gold by the end of 2026.

“Our forecast incorporates two drivers: that central banks maintain their recent pace of accumulation and that private investors step up gold ETF purchases as the Fed cuts rates,” Goldman analysts Lina Thomas and Daan Struyven said in a research note.

Meanwhile, BofA Securities has an even more bullish $6,000 target for gold in the coming months.

“Fundamentals on the physical market are somewhat shaky but still supportive. That said, we were somewhat concerned about the speed of recent price gains and the rise in volatility accompanying them,” BofA’s global commodities research team said in a note.

Clouding their forecast is political uncertainty in the run-up to this year’s mid-term elections in November and the direction of U.S. interest rates under President Donald Trump’s nominee for the Federal Reserve chair, Kevin Warsh.

“While the ultimate impact of a Warsh Fed on precious metals is not entirely clear yet, the correction may not necessarily have been driven by a view on where rates are going – in the end, Warsh seems to be jockeying for further easing – but by optimism that the Fed will be less data-dependent, more forward-looking and pragmatic,” BofA said.