(Yicai) Feb. 2 -- Institutions expect international gold prices to continue their long-term run, as they believe the recent plunge is just a short-term adjustment.

The market is digesting the potential higher interest rate environment after the US Federal Reserve changed leadership, said Shao Xingyu, analyst at Guosen Securities. After the sharp decline, market sentiment has shifted from extreme excitement to panic, he noted, adding that in the medium term, the macro logic for the rise of precious metals has not shown obvious signs of wavering.

In the short term, gold prices may enter a period of wide-range fluctuations, with a cautious buying sentiment with a certain degree of support, but they are still expected to resume their upward trend within the year, said Tan Yiming, analyst at TF Securities.

The long-term investment demand for gold from global central banks will likely continue to exist, providing fundamental support for gold prices, Tan noted. After the short-term speculative sentiment subsides, the upward trend may re-emerge, he predicted.

In the short run, after the extreme one-sided market movement this month, the driving force for market correction will keep accumulating, and the ensuing adjustment trend will continue further, according to the research institute of China Merchants Bank. In the medium-to-long term, the fundamental logic of gold remains solid, and the bull market trend has not changed.

Gold prices may rise to USD6,500 per ounce this year, the China Merchants Bank research institute predicted.

After rising nearly 20 percent to record USD5,600 per ounce last month as of Jan. 29, the London spot gold plunged as much as 16 percent to USD4,700 per ounce on Jan. 30, closing at USD4,880. That was the biggest one-day drop in gold price since February 1980.

It has been extremely rare for gold prices to surge more than 20 percent in a single month since 1968, and the last time it happened was 1983, according to the research institute of China Merchants Bank.

“Such a sharp drop was only a matter of time,” said Liu Yuxuan, a researcher of futures and precious metals at Guotai Haitong Securities.

The industry believes that the direct cause of the latest sharp decline was the appointment of Kevin Warsh as the new chairman of the Fed by US President Donald Trump, which may lead to a tighter monetary policy and a rebound of the US dollar.

In fact, a large number of short-term profit-taking positions had accumulated during the surge in gold prices, and this leadership change triggered the concentrated selling by short-term speculators.

Some believe that the drop was just a matter of time, based on historical data. Over the past 60 years, the gold market has witnessed three decade-long rounds of bull markets. Now, we are in the third round that started in 2016, meaning that we are at the end of this cycle.

It is worth noting that this trend has also affected the silver market. London silver prices fell from around USD121 at the highest on Jan. 29 to about USD78 at the lowest on Jan. 30, with a maximum decline of over 35 percent. They ended the day down 26 percent at USD85.3 per ounce.

The large-scale withdrawal of individual investors from silver exchange-traded funds indicates that it may be difficult to organize an effective second attack in the short term, Shao predicted.

Editor: Futura Costaglione