Gold and silver experienced a drastic setback before the weekend: Gold fell by more than 10%, and silver even by more than 30%. The vehemence of the movement seems extraordinary at first glance – but analysts emphasize that the volatility is not surprising given the previous exaggerations. Both precious metals had technically become significantly “overextended” in January after prices had risen to extreme heights in a short period of time.
The timing is remarkable: According to the report, the largest daily loss in the history of the gold price follows only two days after the largest daily gain. At its high on Thursday, gold was trading at $5,602 per ounce, up around 29.5% in January. Silver temporarily reached an all-time high in intraday trading above $121 and recorded an increase of 68.5% in January. According to market estimates, such a trend is hardly sustainable at this speed, especially in the first weeks of a year.
Gold price under pressure: Overheating, positioning and thin liquidity
The recent fluctuations are classified by several experts primarily as a result of technical factors. Neil Welsh, Head of Metals Trading at Britannia Global Markets, speaks of “incredibly volatile” days across the metal complex. For gold and silver, the pullback was not unexpected given the pace and magnitude of the January rally. Both markets were technically overbought; positioning, leverage and options activity had reached levels that are often observed at short-term peaks.
The market structure also amplified the movements. Ole Hansen from Saxo Bank points out that the strong monthly gains have made trading conditions increasingly difficult. Market makers have shown less willingness to take on risk. This leads to thinner liquidity and larger spreads – and thus to stronger fluctuations when waves of selling or buying set in.
From this perspective, the slump does not appear to be an isolated event, but rather a reaction to a previously extremely one-sided market movement. Matthew Piggott from Metals Focus classifies the January rally as a phase of “irrational euphoria” and sees the current sell-off – despite its severity – more as a correction mechanism after an exaggeration.
Silver price falls more sharply: Leverage and market mechanics in focus
The fact that the silver price fell significantly more sharply in percentage terms than the gold price fits into the picture of a market with a higher susceptibility to fluctuations. Silver often reacts more sensitively to position reductions because liquidity and market depth can dry up more quickly in stress phases. If many short-term positions are reduced at the same time and options structures have to be adjusted, this can additionally accelerate movements.
Despite the extraordinary sell signals, many market observers do not consider the overriding trend to be automatically broken. Welsh emphasizes that the macroeconomic forces that have supported gold, silver and copper are still present. He describes the episode as a correction of positioning within an existing upward trend – but associated with the expectation of wider trading ranges. This view boils down to this: Even if the markets “let off steam” in the short term, some analysts expect pullbacks to meet with demand as soon as the technical situation has been cleared up.
When asked where the gold price could find support in such a scenario, market observers mention specific marks. Ipek Ozkardeskaya from Swissquote sees potential for a test of support around $4,600 per ounce. Alex Kuptsikevich from FxPro is initially focusing on $4,700. Both marks are mentioned in the context of technical benchmarks – not as a forecast, but as zones in which market participants are paying increased attention to price reactions.
US monetary policy moves into the foreground: Warsh nomination and interest rate debate
In addition to technical factors, the report also states that expectations regarding the US economy and interest rate development play a role. The political component is mentioned as an additional trigger: Donald Trump has announced that he intends to nominate Kevin Warsh as the new Chairman of the Federal Reserve. Warsh was already Governor of the Federal Reserve in 2006, and some observers associate his personality with the hope of more stability in US monetary policy.
Charlie Ripley of Allianz Investment Management describes the nomination as potentially groundbreaking for the direction of monetary policy and the mandate of the Federal Reserve. At the same time, Warsh is described as an “inflation hawk” – although market participants do not assume that he is fundamentally in contradiction to Trump’s well-known position of wanting to see lower interest rates. In this context, Thu Lan Nguyen from Commerzbank argues that political pressure on the Federal Reserve could continue. From her point of view, this supports the assumption that interest rate cuts could ultimately be greater than currently priced in by the market.
At the same time, expectations remain inconsistent. The report points out that the CME FedWatch Tool for 2026 continues to signal a first interest rate hike in June and only two interest rate cuts for the year as a whole. BNP Paribas, in turn, expects according to the text that the Federal Reserve will leave interest rates unchanged in 2026 after the FOMC left the key interest rate corridor at 3.5% to 3.75% at the end of January.
New inflation data adds additional complexity: Producer prices rose significantly in December; according to the report, the overall index rose by 3.0% year-on-year, and the core value (excluding food and energy) by 3.3%. The US labor market report (Nonfarm Payrolls) could further shift interest rate expectations in the coming week. In addition, the first meetings of the year are on the agenda at the Reserve Bank of Australia, the European Central Bank and the Bank of England – dates that can provide additional impetus in an already nervous environment.
