Gold and silver prices rebounded in Tuesday’s trading (February 3) after sharp turbulence in the metals market began to ease. Market sentiment was further supported by a surge in manufacturing activity in the United States.
According to Reuters, gold prices rose around 3% to US$4,800, while silver jumped about 5% to US$83.34.
Both metals had previously experienced extreme volatility following the nomination of Kevin Warsh to the Federal Reserve. Market participants believe Warsh may push for balance sheet reduction at the central bank and higher bond yields—conditions that typically weigh on precious metals, as gold and silver do not offer interest income.
However, investors assessed that the recent price declines had gone beyond fundamental factors. The sell-off was largely driven by widespread liquidation of leveraged positions, which then rattled global commodity and equity markets as investors sold other assets to cover losses.
“That was a process of clearing out the leverage that had built up in the system,” said Christopher Forbes, Head of Asia and the Middle East at CMC Markets.
Forbes added that not all market participants have been able to withstand the pressure from the unwinding of gold and silver positions.
From the United States, the Purchasing Managers’ Index (PMI) showed that factory activity expanded for the first time in a year in January.
Meanwhile, markets also reacted to the announcement of a trade agreement between the United States and India.