Gold and silver prices extended their recovery on Wednesday after a turbulent start to the year, though analysts warned that further gains could be tempered by near-term market volatility and geopolitical uncertainties.
Spot gold rose 2.4 percent to $5,054.60 per ounce in early European trade, while gold futures gained about 3.4 percent to US$5,100. Silver rebounded even more sharply, with spot prices up 5.8 percent to US$90 per ounce and futures climbing 8 percent to US$90.16.
The rally followed steep losses last week, when gold fell nearly 10 percent and silver plunged 30 percent in one of its worst single-day performances since 1980. Analysts attributed the rebound to renewed buying from investors seeking safe-haven assets and a softening U.S. dollar.
“Gold’s rebound today reflects renewed dip-buying after one of the sharpest corrections in precious metals in years, as broader markets stabilised and the U.S. dollar softened,” said Ewa Manthey, commodities strategist at ING.
The ICE U.S. Dollar Index was little changed at 97.382 on Wednesday but has retreated sharply from a recent high of 99.39 on January 19. Movements in the dollar are closely watched by precious metals investors, as a weaker greenback typically supports gold and silver prices.
Mining stocks listed in London also participated in the rally, with Rio Tinto up 1 percent and Anglo American trading 0.7 percent higher. Antofagasta, however, was down 0.2 percent. The FTSE 350 Precious Metals and Mining Total Return Index rose two percent to about 34,963 points.
UBS CEO Sergio Ermotti noted that clients are increasingly cautious, seeking protection from market uncertainty. “They are looking for protection and are shying away a little from the tech sector,” Ermotti said. “Excess cash is being redeployed, probably into capital markets and precious metals, though broadly clients are maintaining their asset allocations.”
Despite the recovery, analysts warned that near-term volatility is likely to persist, and further gains may be more gradual than the sharp rally seen over the past three months.
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“While this move is largely a positioning-driven reset rather than a structural reversal, the pace and sustainability of any further gains will be shaped by movements in the dollar, interest-rate expectations, and investor risk sentiment,” Manthey said.
Goldman Sachs has set a $5,400 target for gold by the end of 2026, citing continued central bank purchases and rising gold ETF inflows as the U.S. Federal Reserve is expected to cut interest rates. BofA Securities offered an even more bullish forecast of $6,000 per ounce, although it noted that the speed of recent price gains and elevated volatility warrants caution.
Political uncertainty is adding to market nervousness. Analysts highlighted the potential impact of the 2026 U.S. mid-term elections in November and the direction of U.S. monetary policy under President Donald Trump’s Federal Reserve nominee, Kevin Warsh.
“While the ultimate impact of a Warsh Fed on precious metals is not yet fully clear, the recent correction may reflect optimism that the Fed will adopt a forward-looking, pragmatic stance rather than a strict data-dependent approach,” BofA said.
Investors are also keeping an eye on the physical market, which remains supportive but cautious. Rising volatility in recent weeks has prompted some portfolio rebalancing, with increased allocations to gold and silver as hedges against inflation, currency swings, and geopolitical tensions.
As markets navigate these uncertainties, analysts expect that precious metals will continue to act as a barometer of risk sentiment, with further gains likely tied to U.S. interest rates, the strength of the dollar, and global political developments.
