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Gold and silver entered the new week under heavy pressure, deepening a rapid sell-off that began just days after both metals broke record levels. After months of strong gains fueled by safe haven demand and speculation, the precious metals market experienced a swift turnaround driven by a firmer dollar and a wave of investors locking in profits.
Spot gold fell about 6 percent on Monday, landing near 4,538 dollars per ounce. The drop adds to Friday’s nearly 10 percent plunge, which pushed prices below the psychological 5,000 dollar mark for the first time in weeks.
Silver faced an even harsher correction. Following a 30 percent single-day drop on Friday, the steepest fall since early 1980, the metal lost more than 12 percent on Monday and traded around 74 dollars per ounce. The two-day decline marked one of the most turbulent stretches the precious metals market has seen in years.
Analysts point to shifting monetary expectations
According to market watchers, the sudden reversal can be traced to a dramatic shift in expectations around United States interest-rate policy. Through much of January, investors had grown more confident that rate cuts would arrive sooner rather than later. That optimism had fueled a powerful rally that sent gold briefly above 5,600 dollars per ounce and lifted silver past 120 dollars per ounce early Thursday.
By Friday, however, markets began reassessing the outlook after President Donald Trump announced his intention to nominate former Federal Reserve Governor Kevin Warsh to lead the central bank when Jerome Powell’s term expires in May. Warsh has long been associated with a preference for tighter monetary conditions. The possibility of a less dovish Federal Reserve cooled momentum in assets that tend to benefit from expectations of lower rates.
Dollar strength adds pressure on metals
The United States dollar index strengthened nearly 1 percent since late last week. Even modest increases in the dollar often weigh heavily on gold and silver because both are priced in dollars globally. When the greenback rises, the metals become more expensive for foreign buyers, which can reduce demand.
Higher interest rates also work against gold by increasing the appeal of interest-bearing assets such as United States Treasury securities. Investors often treat Treasurys as an alternative safe haven, making gold relatively less attractive when rates are expected to climb or remain high.
At the same time, geopolitical tensions showed signs of easing after the administration signaled optimism about negotiating with Iran. Oil futures responded with a decline of around four percent on Monday. Softer geopolitical pressures can reduce demand for traditional safe havens like gold and silver.
Despite volatility, long-term gains remain intact
Even with the intense two-day slide, both metals remain higher for the year. Silver is up roughly 16 percent since early January, while gold holds an approximate 8 percent gain. These increases follow extraordinary rallies last year. Gold surged about 65 percent over twelve months and silver soared roughly 145 percent over the same period as investors sought protection from inflation concerns and uneven global growth.
Market analysts expect the metals to remain volatile in the short term as traders search for clarity around Warsh’s likely policy direction and upcoming economic data. Some believe that renewed weakness in the dollar or signs of a more accommodative stance from the incoming Federal Reserve leadership could bring buyers back into the market. Others anticipate extended choppiness as investors unwind speculative positions built during last week’s record-setting run.
For now, the precious metals sector appears to be adjusting to a new phase after months of relentless upward movement. Whether gold and silver can revisit their recent highs will likely depend on how monetary policy evolves through the year and how global investors reassess risk in an increasingly unpredictable economic environment.
Source: CNBC
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