Silver And Gold Are No Longer Overbought But Still Under-Owned After Steep Selloff — Saxo Bank's Hansen
10/22/2025
Gold and silver prices are seeing a long-overdue correction, with silver's steeper drop highlighting the liquidity gap between the two metals, but both are still under-owned in portfolios, and the structural drivers behind the rally remain intact, according to Ole Hansen, Head of Commodity Strategy at Saxo Bank.
"The risk of correction in gold and silver has been steadily rising in recent days, though exceptionally strong pre-Diwali demand helped support prices," Hansen said on Wednesday. "However, a very technical extended rally combined with renewed 'risk-on' tone across stock markets, a firmer dollar and not least the start of Diwali — which typically signals softer physical demand from Asia — have made traders increasingly cautious, more focused on protecting gains than chasing new highs."
He said that while the precise trigger for Monday's dramatic selloff was unclear, gold's three failed attempts to break above $4,380 "probably helped change the mindset" from greed to fear among precious metals traders.
"What followed was a classic rush towards an exit too narrow to cope with the sudden burst of selling from technical focused leveraged traders and recent buyers finding themselves underwater," Hansen said. "The latest price action once again underlined the importance of liquidity differences between gold and silver, with the latter seeing liquidity that is roughly nine times lower than gold's. These disparities magnify both rallies and corrections: a surge in buying quickly runs into limited supply, and any shift toward profit-taking produces outsized percentage moves."
He noted that both gold and silver bounced during the Asian session after briefly extending Tuesday's selloff, the steepest the metals had seen in years.
Hansen said Saxo Bank still maintains its bullish outlook for gold and silver into 2026.
"Following a much-needed correction/consolidation, traders will likely pause for thought before concluding the developments that drove the historic rallies this year has not gone away, and will likely continue to offer support to metals that are no longer overbought but remains underowned in portfolios," he predicted. "In the short-term, the Trump-Xi, and Trump-Putin meetings — if they are carried out — are key risk events that may help determine the duration of the current setback."
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