Gold and silver rebound: “Dead cat bounce” or “bull market restart”?
After experiencing a historic crash and violent turmoil, the gold and silver markets are now at a critical crossroads. Although precious metal prices have seen a technical rebound following recent record-breaking sell-offs, there is a huge divergence in the market on whether this is merely a short-term "dead cat bounce" or a resumption of the long-term bull trend. Institutional investors have drastically reduced their risk exposure due to extreme volatility, quantitative funds remain in sell-off mode, while retail investors in the physical market have demonstrated astounding "bottom-fishing" enthusiasm.
Latest market movements show that gold and silver prices are trying to stabilize after a fierce correction. According to Goldman Sachs data, this sell-off has, by some metrics, surpassed previous extremes; COMEX gold and silver registered their largest single-day drops since the early 1980s. Although prices have rebounded off their lows, volatility remains extremely high, options liquidity briefly dried up, indicating market structure is still fragile and short-term instability with two-directional price swings may persist.
This turmoil has produced a direct divergence in market participant sentiment. On one hand, Wall Street institutional traders are urgently reducing directional risk; Goldman Sachs' trading desk points out that extreme volatility makes holding large positions "very uncomfortable," and recommends reducing position size. On the other hand, physical market demand is exceptionally strong. According to Bloomberg, from Singapore to Sydney to China’s gold trading centers, retail investors are lining up to buy gold bars and jewelry, hoping to take advantage of the price correction, and this strong retail buying is providing some support for gold prices.
Despite unclear short-term trends, mainstream institutions have not abandoned their long-term bullish views. Deutsche Bank reiterated its target price of $6,000 per ounce for gold, saying that macro drivers remain unchanged. Goldman Sachs also maintains its forecast for gold to reach $5,400 in December 2026, citing ongoing central bank gold purchases and the Fed’s potential rate cuts. The current market focus is on whether resilient physical demand is strong enough to offset the pressures from technical breakdowns and institutional deleveraging.
Technical Damage and Quantitative Selling
From a technical perspective, precious metals face severe short-term challenges. According to The Market Ear analysis, gold recently broke below the 50-day moving average and its uptrend line amidst the chaos; although the subsequent rebound pushed it back above the 21-day moving average, significant resistance remains above. The initial resistance level is near $5,100, roughly corresponding to the 50% retracement of the previous large red candle (excluding the wick), with the 8-day moving average just below.
The technical recovery for silver looks even tougher. While silver has also rebounded, its performance is described as "rather weak." Silver currently remains restricted by the 21-day moving average above it, with resistance near $92, and is still far off from retracing to the 50% level of its crash candle (around the $100 region). The Market Ear notes, silver volatility holds around 85%, suggesting average daily swings of up to 5.5%; such intense volatility will require more time to "cool off."
Moreover, quantitative funds’ moves have increased downward pressure. According to Goldman Sachs' forecast models, Commodity Trading Advisor (CTA) strategies have switched to selling or maintaining sell modes for both gold and silver. Menthor Q data also shows the silver market has undergone aggressive forced selling. Although high volatility may attract some volatility-selling strategies seeking income enhancement, which may help stabilize prices in the short-term, gold prices may need time to consolidate before a new directional move emerges.
Institutional Hedging and Risk Exposure Adjustments
Facing unprecedented volatility, institutional investors are adopting a much more cautious defensive posture. Goldman Sachs commodity trader Kim notes that the desk has drastically reduced directional risk exposure. Although medium-term structural trading logic remains, the rapid front-loading of investment demand caused prices to rise too quickly, making it uncomfortable to hold large beta assets. Kim points out, the volatility market is already misaligned, front-end volatility curve is very expensive, and recommends investors substantially reduce position sizes because the nominal value and volatility of "one ounce of gold" now far exceed those of a year ago.
Infrastructure Capital Advisors Chief Investment Officer Jay Hatfield noted the market had shifted to momentum trading rather than fundamentals weeks ago, and this crash was the result of momentum unwinding. Heraeus Precious Metals' trading head Dominik Sperzel confessed this is the wildest market he has seen in his career, saying gold should be a symbol of stability, but such wild price swings are clearly at odds with that trait.
The Physical Market “Bottom Fishing” Frenzy
In stark contrast to institutional caution, retail investors in the global physical market are showing strong buying appetite. Bloomberg reports that on the Monday after the gold price collapse, crowds queued at United Overseas Bank (UOB) headquarters in Singapore to buy gold bars, and popular bar products from brands like MKS PAMP SA quickly sold out.
Similar scenes occurred in Sydney and Thailand. In Sydney, there were long lines outside ABC Bullion stores, and even though investors sustained losses last Friday, some still saw this as a good opportunity to enter. In Thailand, Globlex Securities CEO Thanapisal Koohapremkit said the local market remains in buy mode and investors prefer to hold positions and wait.
In China, the traditional consumption season ahead of Lunar New Year is supporting the market. Liu Shunmin, risk manager at Shenzhen Guoxing Precious Metals, noted a surge in bottom-fishing buyers purchasing gold jewelry and bars over the past two days. However, silver market buying interest is relatively weaker. Goldman Sachs analysis pointed out physical buying in China and India were key drivers for prior rebounds, and the recovery of retail interest will be a key signal for market stability.
Long-Term Bullish Logic Intact
Despite the short-term setback, major financial institutions remain committed to the long-term structural bull view on gold.
Goldman Sachs commodities researcher Struyven maintains his year-end 2026 gold price forecast of $5,400, based on three main assumptions: central banks will keep buying gold at an average of 60 tons per month; the Fed will cut rates twice in 2026; and private sector gold allocation will remain stable. Struyven emphasizes that because the uncertainties of global macro policies (such as fiscal sustainability in developed markets) are unlikely to be fully resolved by 2026, and gold’s share in portfolios remains low, further diversification into gold by the private sector is very likely, meaning price risks remain biased to the upside.
Deutsche Bank also said in its Monday report that it will stick to its forecast for gold to reach $6,000 per ounce. Market opinions suggest that the core drivers pushing gold prices higher—unpredictability of Trump-era policies and the "devaluation trade" triggered by investor worries about currency and sovereign bonds—have not changed because of the recent price correction.
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