Historic jump in gold and silver prices
Precious metals markets rebounded strongly on Tuesday, with gold prices surging to their biggest daily gain since the 2008 global financial crisis. This surge came as investors returned to safe-haven assets following a sharp sell-off over the previous two days. Spot gold jumped 5.3% to around $1,622 an ounce, recovering from Monday's low. Meanwhile, U.S. gold futures climbed 6.1% to $1,638 an ounce.
The recovery wasn't limited to gold; silver also surged 9% to $14.25 an ounce, partially rebounding after hitting a record low last week. Among other precious metals, platinum climbed 5.4% to $662 an ounce, while palladium rose 4.8% to $1,801.50.
General context: In response to the global economic crisis
This surge occurred amidst global economic uncertainty triggered by the COVID-19 pandemic. Following widespread sell-offs across various asset classes, including gold, as investors sought cash at any cost in what became known as the “race to cash,” unprecedented stimulus packages from central banks reversed market trends. The US Federal Reserve’s announcement of an open-ended quantitative easing program to purchase bonds proved pivotal, weakening the dollar and fueling concerns about long-term inflation, thus boosting gold’s appeal as a safe haven and store of value.
The importance of gold as a safe haven and its impact on markets
Historically, investors have turned to gold during times of economic and geopolitical crisis. This renewed surge reflects a resurgence of confidence in the precious metal as a hedge against market volatility and the devaluation of paper currencies. Internationally, this trend is influencing the strategies of central banks that hold gold as part of their reserves, and is reshaping the portfolios of global investors seeking stability. Regionally, gold is gaining popularity in Middle Eastern markets, where it is a traditional investment and savings tool, boosting activity in local gold markets and increasing its importance as a strategic asset for both individuals and governments.
Gold price forecast
Commenting on these moves, Ole Hansen, Head of Commodity Strategy at Saxo Bank, said: “Gold has now broken through the first correction barrier at $1,585, and the focus is now on $1,600 – a significant correction level from the recent decline. As for silver, the equivalent levels are higher at $14.50 and $15.20.”
