The price of gold rose more than five percent on Tuesday and is on track for its biggest daily gain since November 2008, while silver also gained strongly as the precious metals rebounded from their steepest two-day decline in decades.
Analysts believe that the upward trend will continue and expect metals to reach new record values later this year.
Spot gold was up 5.8 percent at $4,935.56 an ounce by 0818 GMT. It fell to a low of $4,403.24 on Monday, just two sessions after hitting a high of $5,594.82.
U.S. gold futures for April delivery rose 6.6 percent to $4,958.50 an ounce.
“It’s reasonable to say that this is potentially somewhere around fair value, given that we’ve seen a market that has behaved quite irrationally for several weeks,” said Kyle Rodda, senior market analyst at Capital.com.
– Current prices return gold and silver to the levels they were at in the beginning of the second half of January – he added.
Gold’s spectacular rally saw it break through multiple price peaks and gain nearly 13 percent in January, its biggest monthly gain since November 2009, while silver hit an all-time high of $121.64 last Thursday.
Silver rose 10 percent to $87.40 an ounce on Tuesday, after suffering its biggest one-day drop in history on Friday, with a 27 percent loss. On Monday, it further fell by six percent.
Metal prices previously fell after US President Donald Trump nominated Kevin Warsh to be the new chairman of the US Federal Reserve.
– The markets saw Warsh’s nomination by US President Donald Trump as the choice of a relatively credible person, which made the dollar stronger, and it was, in a way, “the needle that pierced the bubble of precious metals” – said Rodda.
CME Group also raised margin requirements on precious metal futures contracts, further fueling sharp declines last week.
The U.S. Bureau of Labor Statistics said Monday that the closely watched employment report for January will not be released this Friday because of the partial shutdown of the federal government.
In other metals, spot platinum rose 5.7 percent to $2,242.55 an ounce after hitting a record high of $2,918.80 on Jan. 26, while palladium rose 5.3 percent to $1,811.39.
