Correction is a natural process, it is always necessary to prevent the formation of a bubble that may burst in the future.
The dramatic sell—off of gold and silver on October 22 was the strongest in the last five years, with gold falling 6% and silver even more in one day, but this fact does not negate the bullish price trajectory, analysts say.
"Correction is a natural process, it is always necessary to prevent the formation of a bubble that may burst in the future," said Ole Hansen, head of commodity Strategy at Saxo Bank.
Despite the short-term risks, Hansen notes that both gold and silver remain in a structural bull market based on a reassessment of confidence in global finance.
"The fundamental background is still determined by the same factors that contributed to gold reaching consecutive record highs," he said.
These are, first of all:
- Weakening confidence in the outdated financial order
- Constant accumulation of funds by central banks;
- Renewed demand for ETFs from investors in the West amid continued demand from Chinese households looking for alternatives after a four-year downturn in the real estate market;
- Declining confidence in fiat money and fiscal regulation.
Hansen admits that gold prices could fall to $3,973 per ounce, and silver to $47.8 per ounce.
On Monday, October 27, gold was trading below $4,000 in the afternoon, while silver was trading at $46.3 per ounce.
Hansen does not see the only reason for the sharp sell—off, three unsuccessful attempts by gold to overcome the $ 4,380 level "only helped traders to change greed to fear," he thinks.
In turn, Nikki Shiels, head of precious Metals research and strategy at MKS PAMP, said that the unprecedented growth of these metals was a sufficient reason for the subsequent correction, as it took only 30 weeks for the gold market to rise from the level of $3,000 to $4,000 per ounce.
"Previously, growth cycles of $1,000 took ten times longer, from 240 to 650 weeks," says the analyst. "Prices are sky—high, the rally is gaining momentum, and an irrational market can collapse at any moment for no reason."
At the same time, she notes that it is too early to say whether this is a market collapse or a short-term correction. And despite significant market uncertainty, she would like to see gold consolidate in the range of $4,000 to $4,500 per ounce in the near future.
Such a move, in her opinion, will allow the market to exhale, regain risk appetite, increase liquidity and form stable support levels.
Carsten Menke, head of research at Julius Baer, said that the sale
