Why are gold and silver plunging?
The two precious metals wiped out $7 trillion in a single day’s perfect storm.
Key takeaways
- The crash was not a fundamental reset but a positioning shock as investors’ precious-metal bets were liquidated.
- Volatility is likely to persist: While long-term buyers may step in, near-term price swings remain elevated as leverage is flushed out.
- Gold’s structural bull case remains intact, while silver is more vulnerable.
Both the surprisingly hawkish pick for the next Fed governor and the mechanics of a heated market triggered the ongoing, historic correction in gold and silver prices.
One of the most violent selloffs in modern precious-metals history began on Friday, Jan. 30. Gold plunged 9%, falling from $5,390 an ounce to $4,895, its steepest single-day decline since the early 1980s. Silver suffered an even more dramatic collapse, plunging as much as 35% midday for its largest one-day drop on record. It closed the session down 26% at $85 an ounce, down from an opening price of $115.
The scale of the move was extraordinary: Gold and silver erased roughly $7 trillion in combined market value in a single session, as a perfect storm of positioning, leverage, and liquidity constraints triggered mass liquidation.
Suki Cooper, who leads the global commodities research team at Standard Chartered, says she wasn’t surprised by the massive sell-off, given both metals have been trading in “aggressively overbought territory” in the early weeks of 2026. “Both markets were due a correction, particularly to maintain the long-term uptrend,” Cooper says.
Prior to the selloff, gold’s spot price rose 96% in an exceptional rally in the 12 months leading up to Jan. 28, 2026. Silver’s spot price rose 278% during the same period, up to USD 116.61 on Jan. 28, 2026 from USD 30.82 one year prior.
What actually broke the market?
According to Nitesh Shah, head of commodities at WisdomTree, Jan. 30 is likely to go down as one of the most volatile days ever for both gold and silver. “These are price swings you would normally expect over the course of a year, not within a single trading session.”
Analysts point to a sudden shift in the political backdrop as a catalyst. The designation of Kevin Warsh as the next Federal Reserve Chairman reduced perceived political risk, removing momentum from precious metals and triggering sharp reversals in positioning.
But the deeper driver was mechanical. “This was a liquidity event,” says Luigi de Bellis, head of research at Equita. “With volatility spiking, sales were amplified by risk limits, margin calls, and volatility-control strategies. Silver, being thinner and more speculative, magnified the stress as positions had become especially crowded.”
Echoing Bellis’ sentiment, Cooper says structural factors are key determinants for metals price swings, including central banks starting to increase gold purchases in 2022, which has raised prices. Concerns around tariffs, global debt, and currency debasement have also continued to drive “safe-haven demand” in the gold market, Cooper says.
The US dollar has historically acted as a barometer for gold and silver prices, with the dollar typically moving in the opposite direction of the two metals. Following the Fed chair announcement on Friday, the US dollar ticked up slightly. While Cooper still emphasizes structural forces as the primary catalysts for price movements, she says Friday’s shift in dollar valuation change still matters. “With Friday’s move, we started seeing a recovery in the dollar. So, some of the concerns started to ease and helped result in some liquidation in gold positioning.”
Kerstin Hottner, head of commodities at Vontobel, describes the move as a classic deleveraging shock: “Extended speculative positions were forced out of a crowded momentum trade as stop-losses and margin calls cascaded through the market.”
Crucially, the crash was not driven by a sudden change in fundamentals. “Inflation data did not suddenly shift. Policy expectations did not reverse overnight,” says Naeem Aslam, CIO at Zaye Capital Markets. “What failed was the assumption that assets widely seen as defensive would remain liquid under stress.”
The sell-off did not call into question gold and silver’s role as safe havens, but it did show that even defensive assets can turn volatile when investors rush into the same trade simultaneously.
Structural support remains for gold and silver
Despite the violence of the move, most strategists do not view this as the end of the precious metals’ cycle.
Shah argues that gold and silver are undergoing a structural regime shift: “The buyer base for gold is broadening to include Chinese insurers, Indian pension funds, and fast-growing digital and tokenized gold products. These forces are pushing prices into territory traditional valuation models struggle to capture.”
Cooper is also keeping an eye on international markets, namely India and China, whose demand for gold and silver soon are a critical indicator for how prices may swing. China is particularly important, Cooper adds, since the country’s market will likely see a surge in demand for gold and silver ahead of the Lunar New Year on Feb. 17. “We’re coming into that period now where we tend to see that natural seasonal demand picking up, so that will be a key factor to see whether that support helps to limit the downside risk.”
The scale of the correction – roughly $1,200 peak-to-trough so far – is reminiscent of prior sharp drawdowns that ultimately marked entry points for institutional buyers. Claudio Wewel, FX strategist at J. Safra Sarasin, notes that gold would likely need a further major macro shock to break decisively below the psychologically important $4,000 level. “We are close to the bottom, but volatility should remain elevated in the near term.”
Invesco strategist Luca Simoncelli agrees: “The fundamental and strategic drivers behind gold and silver remain intact. Allocation to precious metals is increasingly strategic, not tactical.”
What does it all mean for the long term?
Shah believes the violent drawdown will deter short-term speculators but may open the door for longer-horizon investors: “The market may have flushed out a significant portion of speculative froth, potentially creating space for long-term strategic buyers to re-allocate.”
Vontobel’s Hottner is still constructive on gold, pointing to what he sees as durable structural tailwinds. “Central bank buying, ETF inflows, safe-haven demand, and currency debasement remain powerful structural drivers. We maintain an overweight in gold and view the correction as a potential entry point.”
That view is echoed by J. Safra Sarasin’s Wewel, who adds that gold’s medium-term case remains supported by geopolitics and institutional distrust in fiat currencies. “Elevated geopolitical uncertainty and pressure on the rule of law in the US are likely to continue weighing on confidence in the dollar. We also expect gold to benefit ahead of the US midterm elections. Hence, we are inclined to see the current correction as an entry opportunity.”
Silver, however, tells a different story: Industrial demand remains weak, particularly as solar manufacturers continue to reduce silver age. “With speculative positioning still dominating silver price action, we stay absent,” Hottner says. “The price has disconnected from fundamentals.”
