Central bank buying strengthens gold; silver to be volatile, says ING Group

Core Viewpoint - Central bank buying is strengthening gold, while silver is expected to remain volatile due to its smaller market capitalization and sensitivity to demand changes [1][2] Group 1: Market Dynamics - Gold and silver are recovering after a significant sell-off, which was the sharpest in over a decade, with gold experiencing its largest single-day decline since 2013 and silver its largest daily drop on record [1] - The recent sell-off followed a three-month rally where gold prices surged from $4,000 per ounce to over $5,600 per ounce, and silver prices more than doubled from about $50 per ounce to nearly $120 per ounce [1] - The sell-off was triggered by President Trump's nomination of Kevin Warsh as the next Fed chair, leading to a rise in the US dollar and profit-taking by investors [1] Group 2: Recovery and Future Outlook - Following the sell-off, gold rebounded over 6% and silver rose around 8% as market stress eased, indicating that the earlier sell-off was likely overdone [1] - The medium-term outlook for gold remains positive, supported by ongoing central bank purchases and safe-haven demand, despite a slight moderation in central bank buying last year [1][2] - Silver's recovery is contingent on stabilizing ETF outflows, which have decreased for eight consecutive days, highlighting its sensitivity to market sentiment [1] Group 3: Volatility and Investment Sentiment - Silver is characterized by higher volatility compared to gold, making it more susceptible to changes in sentiment and positioning [1] - The medium-term fundamentals for silver remain unchanged, driven by industrial demand and tight physical balances, but its price movements are expected to be more erratic [1][2] - Market volatility is anticipated to remain high in the near term due to ongoing adjustments in market positioning following recent events [2]