Editor’s Note
This article discusses the recent sharp reversal in precious metals markets following a historic rally. The dramatic price movements highlight the volatility inherent in commodity trading.
The gold price is currently under massive pressure after a months-long record hunt. After a prolonged period of only upward movement, investors are now experiencing a drastic shift in sentiment in the precious metals market. Prices for gold and silver dropped significantly at the start of the week, temporarily ending the historic rally.
A troy ounce of gold (approximately 31.1 grams) cost around $4,500 in early trading, down by up to eight percent, after the price had already fallen by nine percent on Friday. This shows an abrupt change in direction for the gold price trend. The gold rate is also coming under strong pressure.
A key trigger for the recent gold price plunge was the nomination of former Fed Governor Kevin Warsh as the successor to US Federal Reserve Chair Jerome Powell by US President Donald Trump. This fueled market doubts that a significant monetary policy easing would actually occur. Speculators who had bet on an even higher current gold price were likely caught off guard. Since these speculators often “gamble” on credit, they quickly get into trouble when prices fall and have to sell positions. This puts further pressure on the price – creating a downward spiral.
Analysts are also closely observing the situation. Ahead of the weekend, the nomination of Kevin Warsh as the next chair of the US Federal Reserve weighed on sentiment in the gold markets. He was not considered the “ultra-dovish” nomination that had been expected. A dove is someone who tends to support loose monetary policy, preferring low interest rates and measures to stimulate the economy. Such a stance can often support the stock market and benefit the gold price because gold becomes more attractive when interest rates are low. The opposite is hawkish: Hawkish central bankers focus primarily on fighting inflation, are more in favor of higher interest rates and stricter monetary policy. Kevin Warsh leans more towards the hawks.
Additionally, the gold price came under renewed pressure at the start of the week after the CME Group raised margin requirements. The US futures exchange operator announced increases in performance bonds for its metal futures on Saturday.
Margins for COMEX gold futures will be raised from 6% to 8%, while margins for COMEX silver futures are set to rise from 11% to 15%. Higher capital requirements dampen speculative activity, reduce liquidity, and force traders to unwind positions. This typically has a negative impact on the gold rate. By 8:05 AM (CET), the most actively traded gold future (April) had decreased by $188.50 to $4,556.40 per troy ounce.
The silver price also suffered a dramatic setback. For silver, the plunge from the record high is even more drastic. The price per troy ounce fell by up to a further 15% on Monday to as low as $72.79 at times. The loss on Friday, after heavy turbulence with an interim drop of 36%, stood at 26% at the close of trading. The silver price is thus around 40% below the record high of $121.65.
Parallel to the start of trading on the stock markets, the situation continues to look bleak, with the current silver price down by approximately 8.5%. At 9:05 AM, the price for the second most important precious metal was quoted at €77.50. This demonstrates the extreme nervousness in the precious metals market, which is heavily burdening not only the gold price trend but also silver trading.
Despite the significant losses, the current gold price remains somewhat more expensive than at the end of 2025. After all, gold had risen by 65% last year. Consequently, gold now costs nearly $1,100 or almost one-fifth less than the record high of $5,595, which was only reached on Thursday.
Precious metals – led by gold – continue to be considered “safe havens” in times of crisis by many investors. Analysts at JPMorgan stated that despite the recent volatility, they continue to assume an intact rally in the long term.