03.02.26

Precious Metals Meltdown: Gold and Silver Prices Fall

Precious metals markets delivered a sharp reminder of how quickly sentiment can turn. After a powerful rally that pushed gold and silver to multi-year highs and drew record trading volumes into metals-linked ETFs, last week ended with abrupt and violent price reversals. These moves reflect not a sudden change in the long-term fundamentals for gold and silver, but the growing influence of leverage, speculative positioning, and increasingly “financialised” trading behaviour in markets that are not always built to absorb it. Our Chief Investment Officer, Jeff Brummette, takes a closer look at what has been happening with precious metals, gold and silver in particular.

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Last week saw some of the biggest one day moves in gold and silver prices in years, alongside record trading volumes in gold and silver ETFs.

Gold has been trending higher since the start of the Ukraine war, as global central banks moved to diversify reserves away from the dollar and euro after witnessing the freezing of Russia’s foreign assets. Physical gold held in your own vault remains beyond the reach of such actions.

Silver has benefited from an additional tailwind: its critical role in electric power transmission equipment. The surge in electricity demand driven by AI data centres is lifting silver consumption, alongside the more widely recognised demand for copper.

The price of silver jumped from around $65 an ounce in late December to over $120 an ounce by Thursday of last week, only to fall by over $40 an ounce (a 33% decline) on Friday alone.

 

Silver Futures $/oz

Source: Bloomberg Finance L.P.

 

Volume in the silver ETF SLV had been surging all month.

 

SLV Traded Volume in $ (USD)

Source: Bloomberg Finance L.P.

 

Gold saw a more modest 17% decline on Friday.

 

Gold Futures $/oz

Source: Bloomberg Finance L.P.

 

When markets experience near-vertical price spikes like those seen in gold and silver, they often become vulnerable to sharp corrections.

 

Gold & Silver $/oz

Source: Bloomberg Finance L.P.

 

Market commentary initially linked these price declines to President Trump’s announcement of Kevin Warsh as his candidate to be the new Chair of the Federal Reserve Board, with some market observers characterising Warsh as more hawkish than the other candidates that had been floated by the White House. We do not believe Kevin Warsh is a “hawk” by any means. President Trump wants lower interest rates, making it highly unlikely he would seek to appoint anyone to the Federal Reserve who would be inclined to oppose that stance.

In our view, these moves are simply the result of an overheated market that had attracted a wave of new speculative participants deploying substantial leverage. Financial markets increasingly resemble gamified trading arenas, as participants use zero-day options and other forms of leverage to boost their potential returns. Indeed, it could be argued that financial market trading is seen as similar to sports betting by many participants. When significant leverage collides with less liquid instruments, the result is often heightened volatility.

Leverage can cut both ways. As shown in the table below, trading volumes in gold and silver ETFs surged to levels comparable with major equity indices and even certain mega-cap stocks. Historically, volumes in these metals-linked ETFs have been just one-tenth to one-twentieth of what we saw during this episode, a clear indication of how unusual and destabilising this surge has been.

 

Weekly Notional Trading Volume ($ bns)

Source: Bloomberg, Goldman Sachs Global FICC & Equities as of January 30, 2026.

Past performance is not indicative of future results.

 

To further add fuel to the volatility, the CME (Chicago Mercantile Exchange) where the bulk of gold and silver futures are traded, adjusted the margin formula for precious metals contracts. With prices surging, this triggered a sharp increase in margin requirements, which likely forced some leveraged investors to sell. 

We would not be surprised to see continued consolidation or even some short-term weakness in gold and silver. Nonetheless, we remain confident in the long-term case for further appreciation.

The price and value of investments and any income that might accrue may fall as well as rise and is not guaranteed. You may not get back the amount of your original investment.

 

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    Jeff Brummette
    Chief Investment Officer

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