War Erases Gold And Silver Gains While Contrarians Eye Value
Gold and silver’s dramatic rally has reversed just as quickly, catching investors off guard. From their late-January peaks, gold has now dropped about 25.5%, while silver has plunged nearly 50%, pushing both into technical bear markets alongside copper.
China Demand Holds
Yet, this price volatility has not suppressed the physical demand in China, where silver imports surged to an eight-year high. The country brought in more than 790 tons in the first two months of the year, including a record February haul of nearly 470 tons.
Demand for physical bars is very strong, and solar cell manufacturers are going gangbusters, Rhona O’Connell, Head of Market Analysis for EMEA and Asia at StoneX Group, said, according to Bloomberg.
Meanwhile, Western analysts have pondered on potential sources of liquidation. IG Australia’s analyst Tony Sycamore told ABC that Gulf countries might be “selling their gold holdings to increase liquidity as the conflict in the Middle East crimps their energy cash flow.”
Panic, Policy, and Positioning
For Michael Gentile, senior portfolio manager at Bastion Asset Management, the market reaction is misplaced. In a Saturday note, he argued “the market has it wrong,” adding the Federal Reserve “will have no choice but to intervene” through rate cuts or yield curve control as war-driven deficits expand and recession risks build.
Rising oil prices, he said, will pressure growth while inflating costs, forcing policymakers to suppress yields to manage the burden of U.S. debt. Gentile attributes the selloff’s intensity to positioning rather than fundamentals.
“When people panic, they sell their biggest winners,” he wrote, noting how gold’s strong performance over the past 15 months made it a prime target for profit-taking.
He remains constructive on the sector, arguing that gold and copper producers now offer compelling value. Strong balance sheet, robust free cash flows, and healthy margins – which are, despite higher energy costs, still historically elevated.
The sharp correction, he suggests, mirrors past episodes, such as the pandemic-era selloff, when metals and miners briefly plunged before leading the subsequent recovery.
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