Institutions Warn: Positions Are Overcrowded, But Bullish Drivers for Gold and Silver Remain Unchanged

On Tuesday, gold and silver prices rebounded after experiencing a historic sell-off. Analysts pointed out that the recent sharp correction was more about position adjustments rather than the start of a sustained decline.

After Monday's drop and last Friday's nearly 10% plunge (the worst single-day loss in decades), spot gold prices began to recover lost ground. Silver was equally notable—after plummeting about 30% last Friday (the worst single-day performance since 1980), it also staged a modest rebound on Tuesday.

During intraday trading on Tuesday, spot gold once rose 4%, with final trading prices stabilizing above $4,771.76 per ounce, up more than 2%. New York gold futures closed up 3% at around $4,791 per ounce. Spot silver soared as much as 7.8% and ultimately rose 2.6% on Tuesday to $81.3 per ounce; New York silver futures rose 7% to $82.67 per ounce.

This rebound comes as investors reassess whether the crash marks a structural turning point or is an overreaction to short-term triggers.

Strategists at Deutsche Bank stated that historical experience suggests this is more likely due to short-term catalysts, although the magnitude of the sell-off has raised fresh questions about market positioning. The bank noted that although signs of increased speculative activity have been building for months, this alone does not sufficiently explain the intensity of last week’s volatility.

Deutsche Bank believes: “The scale of the adjustment in precious metal prices has exceeded the importance of its apparent catalysts. Furthermore, the investment appetite of official, institutional, and individual investors has likely not deteriorated.”

This sell-off was triggered by multiple factors, including the rebound of the US dollar, a shift in market expectations for the Federal Reserve leadership after Trump nominated Kevin Warsh as the next Fed chairman, and position selling ahead of the weekend.

But Deutsche Bank emphasized that the overall investment logic for gold and silver remains intact: “The thematic drivers for gold remain positive. Currently, the conditions for a sustained reversal in gold prices are not present, and the current environment is markedly different from the weak gold markets of the 1980s or 2013.”

Barclays echoed a similar view, noting that although technicals are overheated and positioning is crowded, gold buying remains resilient amid geopolitical and policy uncertainty, as well as the theme of reserve asset diversification.

The sharp volatility in silver reflects its smaller market size, higher volatility, and greater participation by retail investors. However, some analysts remain bullish on this white metal.

eToro market analyst Mike Cudzil said, “Speculative positioning has indeed played a role in the short term, and silver has attracted more retail participation than gold, making it more sensitive to sentiment shifts and short-term trading.” However, he added that blaming all volatility on speculation is “too simplistic.” Silver has real industrial demand, especially in areas related to data centers and artificial intelligence (AI) infrastructure.

A study published in January predicted that global silver demand will surge this decade, driven by the solar photovoltaic industry and the transition to high-efficiency battery technologies. By 2030, annual total demand is expected to reach 48,000 to 54,000 tons, while supply is projected to grow only to around 34,000 tons, meaning that only 62% to 70% of demand can be met at that time.

The annual consumption of the solar industry alone is expected to reach 10,000 to 14,000 tons, accounting for 41% of global supply. Analysts pointed out that this fundamental demand has not disappeared, and the current volatility is merely the typical “lead run” seen during strong phases for silver.