Gold and silver appear to have digested the drastic setback at the end of last week and the beginning of this week for the time being. Gold has already regained the $5,000 per ounce mark, and silver is currently trading above $90 per ounce again.
While many investors are still preparing for a period of increased uncertainty, commodity analysts at Société Générale describe the recent price movements as exceptional, but at the same time as more technically driven. Although the strategists also see scope for further declines, they maintain a fundamentally positive assessment for gold and speak of an “asymmetrical” risk-reward ratio in favor of the upside over the course of the year.
The French bank raised its gold price forecast just a week ago, stating that an increase to $6,000 per ounce by the end of the year was a conservative assumption. According to the analysts, nothing has changed in this fundamental view – despite extreme fluctuations that were unleashed on Friday and initially continued at the beginning of the week.
Gold and silver: Not corrected, but “deleveraged”
Société Générale does not classify the setback as a normal correction, but as a massive reduction in leveraged positions. “Metal prices did not simply correct on Friday – they deleveraged,” the assessment said. Gold fell by 10%, marking the sharpest intraday decline since the 2008 global financial crisis and the largest daily loss since the early 1980s. Silver simultaneously fell by 30%.
According to the analysts, such movements are an indication that fundamental news or a sudden reassessment of the precious metals market did not trigger the situation. Rather, the events were a consequence of positioning, liquidity and the mechanisms of derivative and system trading. Gold and silver in particular had previously been technically significantly overbought. In an environment with thin liquidity, a comparatively small impulse is then enough to trigger a chain of sales.
The analysts describe a typical process in stress phases: If positioning is too stretched, stop-loss marks are triggered, margin requirements increase, funds reduce risk and additional sales reinforce the trend. In the case of silver, the disproportionate slump is a classic sign that leverage has been “washed out”. According to the SocGén, profit-taking, value-at-risk limits, deleveraging of CTA strategies and the fact that the movement took place at the end of the month – a phase in which positions are often technically adjusted – had a reinforcing effect.
Trigger Warsh nomination: Dollar reaction and “less bad than expected”
The analysts cite a political personnel decision from the USA as the direct trigger behind the sell-off: President Donald Trump announced that he would propose former Fed Governor Kevin Warsh as the next Chairman of the US Federal Reserve. The news supported the US dollar in the short term – after it had previously fallen to a new multi-year low during the week.
The bank’s interpretation for the gold market is interesting: gold does not necessarily need rising or falling interest rates to react. Rather, a monetary policy that is “less bad than expected” is sufficient. This was precisely the impression that was created with the Warsh personnel issue, because from the analysts’ point of view, this reduced a factor of uncertainty – namely the risk of institutional unrest within the Fed.
In this reading, the news did not directly change fundamental supply/demand factors for gold, but rather shifted expectations of the monetary policy framework and at the same time set an already overstretched market in motion. The sell-off would therefore be a reaction to a new level of expectation that opens an exit channel in a crowded trade – and escalates quickly in thin liquidity.
Options markets in focus: SocGen sees extreme asymmetry in gold
According to their own statements, the analysts are paying particular attention to the options market for the next steps. There they see an increasing demand for put options on the December 2026 strike at $4,000 for gold – a signal that market participants are hedging against or betting on further declines.
At the same time, Société Générale is also registering a build-up of call positions on the upside: The $10,000 strike (December 2026) is showing increased activity, and there are also transactions at even higher levels at $15,000 and $20,000. For the analysts, this juxtaposition is crucial: the extreme points on the upside appear “very asymmetrical” in relation to the downside. From this they derive their core statement that the opportunity profile for gold – despite possible further setbacks – is more likely to shift in favor of large upward movements over the course of the year.
The bank is therefore sticking to its fundamentally positive attitude towards gold. The fundamental reason that could boost precious metals is still there, according to the analysts. In addition, a correction after a strong rally can be “very healthy” because it eliminates overstretched positioning and makes the market more receptive again.
Silver remains more difficult: more downside protection, less call build-up
Although Société Générale recognizes a similar pattern for silver, it assesses the risk profile more cautiously. The analysts see interest in call options, including for May and July 2026 with very high strikes (200-dollar calls are mentioned). At the same time, however, it is noticeable that a larger position has been built up on the downside: especially for 75-dollar puts for March and then for 80 and 90 US dollars.
For the July maturity, the analysts also report a significant build-up of downside positions, particularly at the 65 and 95 US dollar strikes. On the bullish side, however, only around 400 calls have been added, which from the bank’s perspective indicates continued caution towards the silver upside.
The bottom line is that Société Générale’s message remains twofold: Gold is still considered by analysts to be the preferred precious metal with what they see as an asymmetrical opportunity profile and a year-end target of $6,000 still mentioned. Although silver is also being monitored, the bank believes that it faces significantly more pronounced downside risks in the short term – not least because the recent slump has made the extent of the leverage reduction in this market visible.
