Precious metals faced an unprecedented sell-off on Friday as gold futures plunged 11% to trade under $4,900 per troy ounce. This decline marks one of the most significant daily drops in gold prices since the early 1980s. Silver was not spared, experiencing a staggering loss of over 25%, plummeting from a peak of $120 per ounce on Thursday down to approximately $83, with intraday lows reportedly nearing 34%.
The dramatic downturn followed the nomination of Kevin Warsh as the next Federal Reserve Chair by President Trump, which seemed to alleviate fears regarding the central bank’s independence. Warsh, known for his hawkish stance on monetary policy, could bring about shifts that reverberate through commodity markets.
Both metals had enjoyed a remarkable rally prior to the crash; gold had surged to over $5,500 earlier in the week after the Fed opted to maintain interest rates. Meanwhile, silver’s price surge was propelled by its smaller market size and heightened speculative interest, culminating in rapid price escalations.
Precipitating Factors Highlighted by Analysts
Market experts had previously cautioned about the sustainability of the precious metals rally. Mike McGlone, a senior commodity strategist, observed that the velocity of price increases raised the likelihood of forming lasting peaks by 2026. He emphasized the fundamental reasons backing these rallies but urged caution about the rapid gains observed recently.
“When prices rise as rapidly as they have in the metals, deficits can shift fast,” McGlone noted, echoing the sentiment among market watchers.
Ole Hansen, head of commodity strategy at Saxo Bank, had remarked that precious metals were entering a precarious phase due to escalating volatility and thinning liquidity. This forecast proved prescient given the unprecedented market movements on Friday.
Analysts had also pointed to a weakening U.S. dollar, which had lost about 10.5% year-over-year, as a contributing factor to the initial price rally. Robin Brooks, a senior fellow at the Brookings Institution, noted that conviction in a dollar-down trade was high, straining the market’s response to subsequent losses.
Speculation on Asset Rotation Towards Cryptocurrency
The catastrophic crash of gold and silver has sparked interest in potential capital rotation into cryptocurrencies. Bitcoin displayed surprising resilience, declining only 1% during the chaos, prompting discussions about the potential redirection of funds from precious metals to digital assets.
Analyst Michaël van de Poppe remarked on social media, “Gold is down 15–20% on a day. Silver is down 30%. Bitcoin? Only 1%. The rotation game begins.”
However, Bitcoin’s recent performance presents its own challenges, as BTC has declined approximately 6% for the week and nearly 19% over the past year. Veteran trader Peter Brandt echoed the caution, acknowledging that while silver might rebound, it could take months to recover from Friday’s lows.
Brandt noted, “We may not see a new high in silver for months. The battle has been lost, but the war will still be won.”
JPMorgan analysts had previously indicated that silver prices had already surpassed expected norms, underlining the difficulty in predicting market tops in the face of rapid momentum.
As of the latest reports, gold traded at $4,914.96 per ounce, down 8.48%, and silver sat at $85.18 per ounce, down 26.30%. In comparison, Bitcoin was positioned at $84,219, raising eyebrows at potential shifts in investment paradigms.
In these turbulent times, the precious metals market is undoubtedly facing an existential crisis, leaving investors to contemplate the future of their assets amidst such dramatic price movements.
