How much can gold and silver prices fall?

The overdue correction in gold and silver prices has begun. It has been anticipated highly. Carsten Fritsch, an analyst at Commerzbank, asserts that there’s no need to worry and get desperate about it. After some profit-taking, the precious metals are likely to resume their rally.

On Monday, after gold failed in an attempt to reach a new record high, it kicked off its downward trajectory. The precious metal made another attempt to touch a new record but only made it to $2,050. Since then, the price of the yellow metal has been on a downward trajectory. 

The analyst claims that this week we are likely to see some significant profit-taking. For the last few weeks, gold prices saw huge gains. First, they reached $1,920 an ounce, then rose above $2,000 an ounce. They even started to eye $2,100.

Fritsch said that the scale of the increase in the precious metal value has been excessive over the past four weeks. Sentiment towards gold has been extremely positive. Besides, investor interest largely drove the gold rally. However, it has not been enough to maintain the uptrend. Now investors appear to be taking profits. It is also obvious from the gold ETFs. Like what happened in June, they registered outflows. Still, the analyst doesn’t expect a very significant correction in the gold value. The rally will continue after prices consolidate lower. 

Investors have been given a chance to rebalance their portfolios

The key factors that have supported the gold and silver rally have been different from the recession created from the financial crisis in 2008. In both cases, the economic recession was followed by massive quantitative easing by the Fed and other central banks. However, in 2008, the financial crisis could be controlled and the Fed had an exit strategy. 

In this crisis, the coronavirus pandemic seems to have no end in sight. 

The Federal Reserve is committed to doing whatever it can and for as long as it takes, to provide some stability. The round of quantitative easing has no end. It has created the most significant deficit in the history of the US. 

In this scenario, we have seen the safe-haven assets getting much value in a very short period of time. This period has not been enough for investors and market participants to rebalance their portfolio. Now they have been granted a second chance to do it