Gold and silver prices plunged sharply after a dramatic reversal erased recent record highs. Investors reacted quickly to the shifting market environment.
Gold and Silver Fall After January Peaks
In Monday’s Asian trade, spot gold dropped more than 9% to $4,403 an ounce, while silver fell 15% to under $72. Both metals had surged in January as investors sought “safe haven” assets amid geopolitical uncertainty. Markets also worried about the independence of the US Federal Reserve.
Fed Nomination Triggers Market Sell-Off
Prices fell after President Donald Trump nominated Kevin Warsh, a former central bank governor, as Fed chair. Financial markets welcomed the choice, and the dollar rose 1% against multiple currencies. Despite the stronger dollar, gold suffered its sharpest one-day drop since 1983, falling more than 9%, while silver declined 27%. Deutsche Bank analysts identified Warsh’s nomination as the main catalyst for Friday’s sell-off.
Asian and European Stocks Follow Metals
Commodity selling extended into Asian stock markets. South Korea’s Kospi led losses with a drop exceeding 5%, while Hong Kong’s Hang Seng fell 3%. Japan’s Nikkei 225 slipped over 1%. In Europe, the FTSE 100 opened down 0.4%, while mining shares plunged. Fresnillo and Endeavour Mining each lost about 7%.
Oil Prices Also Slide
Crude oil fell more than 5% amid major producers keeping output unchanged and easing US-Iran tensions. The stronger dollar also reduced demand, making oil pricier for non-US buyers.
Metals’ Surge in 2025
Gold and silver enjoyed a record-breaking 2025. Gold posted its largest annual gain since 1979. Tariffs and fears of overvalued AI stocks repeatedly pushed metals to new highs. Gold peaked above $5,500 in January, and silver topped $120.
Interest Rates and Scarcity Support Gold
Wall Street analysts forecast at least two US interest rate cuts in 2026, bolstering gold’s appeal. Investors value gold for its scarcity, with only 216,265 tonnes mined historically. Central bank purchases and geopolitical uncertainty further strengthened demand.
Profit-Taking Sparks Sharp Decline
Economic worries can boost gold, but prices fall when concerns ease or gains appear excessive. Mark Matthews of Bank Julius Baer explained that recent drops occurred because metals had surged too quickly. Profit-taking then triggered a snowball effect.
