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Bank of America has issued a stern warning regarding the immediate future of the precious metals market, suggesting that both gold and silver are poised for a sharp correction following recent volatility. The bank’s lead investment strategist cites extreme technical overextensions and historical precedents as indicators that the metals sector has reached "nutty overbought" levels, potentially signaling the end of the current bull run.
Key Points
- Strategic Warning: Bank of America strategist Michael Hartnett cautions that gold and silver are significantly overvalued, with technical indicators showing historic deviations from moving averages.
- Market Mechanics: Viral reports regarding JP Morgan’s short positions have been clarified as standard dealer settlements rather than market manipulation, dispelling rumors of a "short squeeze."
- Physical Liquidity Crunch: Physical dealers and refineries are reportedly halting operations or refusing buybacks to avoid losses on high-priced inventory, creating liquidity bottlenecks.
- Sentiment Shift: Approximately 45% of fund managers now view gold as overvalued, increasing the risk of a mass sell-off if momentum turns negative.
Historical Indicators and Overvaluation Signals
According to Michael Hartnett, Bank of America’s lead investment strategist, the current trajectory of gold and silver prices mirrors previous market tops that were resolved only by significant global events. Hartnett draws parallels to historical turning points, such as the end of the Nixon era in 1974, the Volcker rate shock in 1980, and the introduction of COVID-19 vaccines in 2020.
The primary concern lies in the technical data. Hartnett highlights that silver’s percentage deviation from its 200-day simple moving average recently hit its second-largest gap in history. This statistical anomaly suggests that prices have detached from fundamental baselines and are likely to revert to the mean.
Furthermore, institutional sentiment appears to be shifting. Recent surveys indicate that 45% of fund managers believe gold is overvalued. Since many of these managers are currently overweight in commodities, a decline in price could trigger forced selling, exacerbating downward pressure on the metals complex.
Clarifying the JP Morgan Short Position
Market volatility on Friday was further fueled by social media speculation surrounding JP Morgan and the closing of 633 short contracts. While many retail investors interpreted this as evidence of manipulation or a panic exit, analysis of the COMEX "Notice of Intention to Deliver" reveals a more standard operational procedure.
JP Morgan, acting as a primary dealer and warehouse for physical silver, facilitated settlements for contracts that matured on January 28. The data indicates that the bank was not speculating on price direction but rather fulfilling its role as a counterparty to clients who had locked in futures contracts months or years prior. The unwinding of these positions coincided with a broader leverage flush in the paper markets, rather than a physical supply crisis.
Physical Market "Pandemonium"
While the futures market grapples with leverage, the physical market is experiencing severe liquidity constraints. Reports from the ground indicate that dealers and refineries are struggling to manage the volatility, with some closing their doors to prevent realizing losses on inventory purchased at peak prices.
One industry source described the situation at refineries vividly:
"Yesterday, I went to sell my gold and it's literally pandemonium at the refineries... these guys are melting stuff down or are all running out of physical money. They've been buying too much and everyone's panic selling."
This liquidity freeze creates a widening spread between spot prices and the prices dealers are willing to pay. Furthermore, major overseas institutions, including the Industrial and Commercial Bank of China, have advised investors to avoid impulsive trading, further dampening demand in key Asian markets.
Market Turnover and Future Outlook
The intensity of the recent trading activity is underscored by data from CPM Group’s Jeffrey Christian, who noted that silver’s turnover momentum spiked to 11.55 times its normal level—a trading velocity exceeding that of high-flying tech stocks like Nvidia. Such extreme turnover often precedes a market exhaustion point.
Despite the bearish indicators, some analysts suggest a short-term "bull trap" or relief rally may occur before a deeper correction sets in. However, with COMEX margins rising and open interest in futures contracts dropping, the path of least resistance appears to be downward. Hartnett advises that investors seeking inflation hedges might find better value in oil rather than precious metals in the near term.
Corporate Spotlight: Resolve AI
In related market news, Resolve AI (NASDAQ: RZLV) continues to draw attention within the technology sector. The company recently issued guidance projecting a nearly ten-fold growth trajectory by 2026. This follows a period of significant expansion, with the stock previously rallying nearly 350% over a 90-day period in mid-2025.
Resolve AI, which specializes in generative AI solutions for e-commerce, reports a client roster exceeding 650 enterprise customers, including major global retailers. The company has established strategic partnerships with both Microsoft and Google to integrate its technology into their respective cloud and sales channels. Financial guidance suggests revenue could reach $350 million by 2026, driven by the broader adoption of AI in the retail sector.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investors should conduct their own due diligence before making investment decisions.
