Gold, silver, crypto: Dip buyers stop selloffs in their tracks
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Illustration: Aïda Amer / Axios
Several asset classes kicked off the week under pressure, with metals and crypto down alongside stocks. That changed as investors bought the dip.
Why it matters: It's indicative of how much the dip buying mentality may be thwarting bigger, and more painful, selloffs.
What they're saying: "Without dip buyers, this market is kinda toast," Steve Sosnick, chief strategist at Interactive Brokers, a platform that caters to everyday investors, told Axios.
- When an asset recovers without a clear catalyst that may be a signal that investors consider the "bargain" price a buying opportunity.
State of play: Just in the last week, investors have bought the dip several times when there was no clear fundamental change indicating a reason to buy.
- The Philadelphia Semiconductor Index, a basket of chip stocks, fell 5% heading into the weekend, then rallied 2.6% Monday.
- Silver had its worst selloff since the 1980s and gold also slumped Friday. Retail came in to buy the dip over the weekend, according to Interactive Brokers. Over the last six months, retail has been a larger participant in silver and gold markets as a share of total volumes.
- Michael Saylor, former CEO of MicroStrategy, has made buying the bitcoin dip his core business strategy, purchasing the digital currency even as it hit its lowest levels since Liberation Day.
- Microsoft's stock fell nearly 12% after earnings. Retail dip buyers emerged on the same day, making it the second-most-bought Magnificent 7 stock among the novice trading crowd for the week, according to JPMorgan.
Zoom in: Dip buyers are typically retail investors, as institutional investors are typically paid to deliver uncorrelated returns and have risk limits and other requirements that can prevent them from buying into selloffs.
- Hedge funds, in particular, may be forced to reduce exposure during periods of volatility, rather than add to it.
- Individual investors have smaller trades, use less leverage and face fewer formal constraints, giving them more flexibility to buy when prices fall.
Threat level: Retail-led dip buying can blunt drawdowns in the short term, but it isn't guaranteed to last.
- If losses deepen, volatility spikes or confidence cracks, those same investors can quickly step back or become sellers themselves.
- That raises the risk that future selloffs, without fresh buyers stepping in, could move faster and cut deeper.
The bottom line: For now, dip buyers are acting as a shock absorber for markets.
- But the markets' resilience increasingly depends on investors who don't have to buy — and can just as easily walk away.
