(Kitco News) - Both gold and silver have seen a solid start to the week as optimism over a potential peace deal in the Middle East eases some inflation fears. However, the drop from their session highs is a reminder that investors should be careful about chasing what has become a volatile market.
One analyst notes that the drop in gold and silver represents a great long-term buying opportunity; however, investors should wait for technical confirmation before re-entering the market.
The sharp correction in gold prices could present a compelling buying opportunity, but investors should resist the urge to bottom-pick and instead wait for technical confirmation before re-entering the market, according to Michele Schneider, Chief Market Strategist at MarketGauge.
In an interview with Kitco News, Schneider said the June 11 selloff may have marked an important turning point for the precious metals market, but it is still too early to declare that a durable bottom has formed.
"Thursday might have been a key reversal, but we haven't gotten the confirmation on that yet," she said.
Schneider explained that a confirmed bottom would require follow-through buying after the initial rebound. Ideally, she added, gold should either post a consolidation session following the reversal or close above the previous day's high with strong volume, signaling that new buyers are entering the futures market rather than simply covering short positions.
"But even more important than gold is silver in terms of really telling us where things are at."
While gold has broken below several key technical levels, including its 50-week, 50-day, and 200-day moving averages, Schneider pointed out that silver has been more resilient.
"Silver, although on a daily chart it broke under the 50- and 200-day moving averages, if you look at the 50-week moving average, it's holding it," she said.
According to Schneider, silver's relative strength could prove critical in determining the next major move for the precious metals sector.
"We know two things," she said. "One is that if silver starts to outperform gold in a real way again, that's somewhat of an inflationary sign. And two is that silver, because of its industrial usage and possible use in AI, solar, and other technologies, means that it will be back in demand."
However, she cautioned that the market has not yet delivered the confirmation needed to justify an aggressive bullish stance.
"If somebody was saying to me, 'Would you buy gold and silver today if you had no position?' I'd probably say, 'Let's wait to see what happens, not only at the end of the day, but on Monday or even Wednesday after the Federal Reserve,'" she said.
Schneider added that solid buying with elevated momentum would suggest investors are becoming more comfortable with the outlook for interest rates and the U.S. dollar while recognizing that the longer-term fundamentals for precious metals remain intact.
Although Schneider is not expecting a runaway inflation shock in the near term, she said the U.S. economy remains vulnerable because the pain from higher prices and borrowing costs is not being distributed evenly.
She said that the current K-shaped economy, in which lower-income households continue to struggle with higher living costs while stronger consumers and businesses have helped keep aggregate economic data surprisingly resilient, highlights this imbalance.
"We have a lot of people who are feeling the pinch," she said. "But if you just look at it from an unemployment standpoint, everybody was expecting unemployment to go skyrocketing. It hasn't."
Schneider said this uneven backdrop has helped give markets and the broader economy a temporary pass. Falling food prices in the futures market, a relatively strong U.S. dollar, stable bond yields, and easing geopolitical fears have reduced immediate inflation concerns. However, she warned that these conditions do not erase the longer-term structural problems that continue to support gold and silver.
Although Schneider remains cautious in the near term, she emphasized that her longer-term bullish outlook for gold and silver has not changed.
"I feel in some ways the fundamentals have gotten more pertinent to a move in the metals," she said.
She pointed to ongoing geopolitical uncertainty, rising government debt, persistent inflation pressures, and continued central bank demand as factors supporting precious metals over time. Schneider also highlighted China's renewed appetite for gold, noting that the country's official gold purchases increased in May, representing its largest accumulation since late 2024.
At the same time, she said markets may be underestimating the longer-term inflationary implications of massive investment commitments tied to artificial intelligence infrastructure and global competition for strategic resources.
"All of this means spending more money," she said. "We're still in a very precarious place in terms of the fundamentals."
For now, however, Schneider said investors should focus on technical confirmation rather than trying to predict the exact bottom.
"Rather than bottom-pick, I would wait for confirmation and nibble," she said. "And then I would add over moving averages."
