Central bank buying strengthens gold; silver to be volatile, says ING Group
Gold and silver are bouncing back after experiencing one of the sharpest corrections in precious metals in more than a decade.
While short-term volatility is expected to remain high as markets adjust to recent moves, analysts suggest the recent sell-off is likely a correction, not a fundamental reversal, unless macro conditions materially change, ING Group’s latest report claimed.
Gold and silver are bouncing back after experiencing one of the sharpest corrections in precious metals in more than a decade.
While short-term volatility is expected to remain high as markets adjust to recent moves, analysts suggest the recent sell-off is likely a correction, not a fundamental reversal, unless macro conditions materially change, ING Group’s latest report claimed.
Gold and silver are bouncing back after experiencing one of the sharpest corrections in precious metals in more than a decade.
While short-term volatility is expected to remain high as markets adjust to recent moves, analysts suggest the recent sell-off is likely a correction, not a fundamental reversal, unless macro conditions materially change, ING Group’s latest report claimed.
This amplified volatility, seen both during market sell-offs and subsequent recoveries, stems from its smaller market capitalization and its sensitivity to both investment and industrial demand.
“While volatility is likely to remain elevated, the medium-term fundamentals for silver remain broadly unchanged,” Manthey added.
Electrification-driven industrial demand and tight physical balances sustain the market.
However, silver’s higher volatility makes it more susceptible to changes in sentiment and positioning than gold.
Manthey said:
However, for silver to build a more durable recovery, ETF outflows will need to stabilise.
ETF demand is a crucial price driver, and holdings have decreased for eight consecutive days.
Gold fundamentals strong
The recent correction in gold prices does not seem to signal a shift in the fundamental macro narrative.
The medium-term outlook remains positive, supported by persistent safe-haven demand, continued purchases by central banks, and the trajectory of real interest rates, the ING report showed.
Although immediate factors fueled the recent surge, the primary, multi-year driver of gold’s appreciation continues to be the steady purchasing by central banks worldwide.
This consistent demand from the “official sector” has served as a stabilising foundation in the gold market ever since this phase of accumulation began in 2022, ING said.
That period marked a significant shift, prompted by Russia’s invasion of Ukraine, which led these institutions to rethink their strategies for reserve security and diversification.
Despite a slight moderation in central bank purchases last year, these institutions continue to be substantial net buyers.
Given current price levels and the recent market correction, central banks are expected to increase their activity once more.
“Their demand tends to be strategic, long-term and largely insensitive to short‑term price swings, reinforcing gold’s structural support over the medium term,” Manthey said.
That said, near-term price action is likely to remain driven by macro data, policy expectations and dollar movements, rather than a smooth continuation of the rally.
What is next?
Market volatility is expected to remain high in the near term as a result of ongoing market positioning adjustments following last week’s movements, according to ING.
Unless there is a significant change in the broader economic situation, we anticipate the recent market decline will be a temporary correction rather than a fundamental, long-term shift.
The speed and longevity of any future recovery hinge upon developments concerning the US dollar, expectations around interest rates, and overall risk appetite.
“But, precious metals are more likely to climb at a steadier, less linear pace from here, rather than repeat the explosive rally seen over the past few months,” Manthey concluded.