Whalesbook
Market Drivers: Shutdown Fears and Fed Policy Expectations
Market participants indicated that Tuesday's bounce in gold and silver prices was primarily driven by position unwinding and technical recovery, rather than a fresh shift in fundamentals. The absence of the closely watched January U.S. jobs report, delayed due to the ongoing partial government shutdown, significantly reduced the influx of new economic signals. This created an environment where markets became more reactive to headlines and speculative positioning flows.
Dollar's Mixed Influence and Policy Backdrop
The U.S. dollar maintained its gains, bolstered by positive economic readings and evolving expectations around Federal Reserve monetary policy. Typically, a stronger dollar weighs on gold by making it more expensive for buyers using other currencies. However, this effect was counterbalanced by broader macroeconomic uncertainty that continues to drive demand for safe-haven assets. Investors remain expectant of at least two Federal Reserve rate cuts in 2026, a backdrop that generally supports gold, as the precious metal does not offer a yield.
Expert Outlook: Gold's Long-Term Strength
N S Ramaswamy, Head of Commodity & CRM at Ventura, believes the recent sharp decline does not signal an end to gold's longer-term uptrend. He points to strong fundamental support: central banks acquired 230 tonnes of gold in Q4 2025, with expectations for over 800 tonnes in 2026. Rising ETF holdings contribute steady investment demand, while elevated geopolitical and macroeconomic risks keep gold relevant as a portfolio hedge. Robust physical demand helps maintain a relatively tight market. Ramaswamy expects gold to eventually surpass its recent futures high of $5,645 an ounce in 2026, though he anticipates continued volatility.
Silver Faces a Slower Recovery Path
Silver's correction was steeper than gold's, largely attributable to higher leverage in the market. An increase in margin requirements forced some traders to liquidate positions, accelerating the sell-off. Ramaswamy anticipates silver trading broadly in the $72-$78 an ounce range in the near term. A clearer recovery signal is expected only if prices can break and sustain above $80 an ounce. Over time, sustained higher prices could alter supply-demand dynamics and help narrow the deficit that previously supported silver's rally.