Gold and silver prices fell sharply after a dramatic reversal erased recent record highs. Investors reacted quickly to changing market signals.
Metals Slide After Record Peaks
In Monday’s Asian trade, spot gold dropped more than 9% to $4,403 an ounce, while silver plunged 15% to under $72. Both metals had reached fresh highs in January as investors sought “safe haven” assets amid geopolitical uncertainty. Markets also worried about the independence of the US Federal Reserve.
Fed Nomination Sparks Market Reaction
Prices fell after President Donald Trump nominated Kevin Warsh, a former central bank governor, as Fed chair. Financial markets welcomed the nomination, and the dollar rose 1% against multiple currencies.
Despite the dollar’s rise, spot gold suffered its sharpest one-day drop since 1983, falling more than 9%, and silver fell 27%. Analysts at Deutsche Bank cited Warsh’s nomination as the key trigger for Friday’s sell-off.
Asian and European Stocks Also Drop
Commodity selling continued on Monday, and Asian stocks fell. South Korea’s Kospi led losses, dropping over 5%, while Hong Kong’s Hang Seng declined 3%. Japan’s Nikkei 225 fell more than 1%.
In Europe, the FTSE 100 opened down 0.4%, while mining companies saw sharper declines. Shares in Fresnillo and Endeavour Mining both fell about 7%.
Energy Markets Follow Downward Trend
Crude oil prices fell more than 5%, driven by major producers keeping output unchanged and easing US-Iran tensions. The stronger dollar also reduced demand, making oil more expensive for non-US buyers.
Precious Metals’ Meteoric Rise
Gold and silver enjoyed a blockbuster year in 2025. Gold saw its largest annual gain since 1979. Concerns over tariffs and fears of overvalued AI stocks repeatedly pushed gold and silver to record highs. Gold peaked above $5,500 at January’s end, while silver reached over $120.
Interest Rates and Scarcity Boost Gold
Wall Street analysts predict at least two US interest rate cuts in 2026, strengthening gold’s appeal. Investors favor gold for its relative scarcity, with just 216,265 tonnes mined in history. Central banks’ bullion purchases and geopolitical uncertainty further increased gold’s attractiveness.
Profit Taking Drives Sudden Drop
Economic worries can push gold prices up, but they fall when concerns ease or gains appear excessive. Mark Matthews of Bank Julius Baer explained the recent collapse: metals prices had already surged dramatically the previous week, and profit-taking triggered a snowball effect.
