Precious Metals Rally Ends in Chaos as Gold and Silver Crash on Dollar Surge

TLDR

• Gold fell 10% on Monday after its biggest drop in over a decade on Friday, now down almost 20% from its recent all-time high
• Silver dropped 16% on Monday, wiping out all year-to-date gains, following Friday’s steepest intraday loss on record
• President Trump’s nomination of Kevin Warsh to lead the Federal Reserve triggered the selloff by strengthening the dollar
• Gold hit a record high of $5,626.80 and silver reached $121.79 last week before the sharp reversal
• Traders say the precious metals rally was “too crowded” with investors unwinding positions after the market became overheated

Gold and silver prices collapsed on Monday in a dramatic reversal after reaching record highs just days earlier. The selloff marks one of the sharpest declines in precious metals markets in over a decade.

Spot gold fell as much as 10% on Monday. The metal is now down almost 20% from its all-time high reached in the previous week. Gold tumbled to $4,536.46 an ounce as of Monday afternoon Singapore time.

Silver experienced an even steeper decline. The white metal slumped as much as 16% on Monday. This followed Friday’s intraday loss, which was the steepest on record for silver.

The crash wiped out all of silver’s gains for 2026. Silver fell below $71.66 an ounce, the level where it ended 2025. By Monday afternoon, silver had dropped to $72.68 an ounce.

Gold had reached a record high of $5,626.80 per ounce last week. Silver hit its peak at $121.79 per ounce. The rapid rise in January was fueled by geopolitical concerns and worries about Federal Reserve independence.

Chinese speculators added momentum to the rally. Investors piled into gold and silver as safe-haven assets. The market became increasingly crowded with buyers.

Trump’s Fed Pick Triggers Market Reversal

The selloff began on Friday after President Donald Trump announced his nomination of Kevin Warsh to lead the Federal Reserve. The news sent the U.S. dollar higher. A stronger dollar makes gold and silver more expensive for overseas buyers.

Traders view Warsh as a tough inflation fighter. His nomination raised expectations for tighter monetary policy. Interest rates and gold prices typically move in opposite directions.

The announcement cleared some market uncertainty. This reduced demand for precious metals as safe-haven investments. Investors had been buying gold and silver to protect against currency debasement.

Robert Gottlieb, a former precious metals trader at JPMorgan Chase, said the trade was “way too crowded.” He noted that reluctance to take further risks would limit market liquidity. Traders with profits were ready to exit at any moment.

Investors Unwind Crowded Positions

The selloff has been driven by bullion-based exchange-traded funds and leveraged derivatives. Jia Zheng, head of trading at Shanghai Soochow Jiuying Investment Management, said most buyers already sitting on profits had one foot out the door.

Record purchases of call options had reinforced upward price momentum. Goldman Sachs noted that sellers of these options were forced to buy more gold as prices rose. This created a feedback loop that accelerated the rally.

Soaring prices and volatility strained traders’ risk models and balance sheets. Ole Sloth Hansen, head of commodity strategy at Saxo Bank, called it a “wholesale exit.” The combination of heightened volatility and the approaching Chinese New Year prompted traders to reduce risk.

China’s domestic markets will close for just over a week starting February 16 for the Lunar New Year holidays. Over the weekend, buyers flocked to China’s biggest bullion marketplace in Shenzhen. They stocked up on gold jewelry and bars ahead of the holiday.

The Shanghai benchmark price extended losses after markets opened Monday. It still traded at a premium over international prices. The pullback in prices is likely to support retail demand in China during peak buying season.

Emmanuel Cau, Head of European Equity Strategy at Barclays, said the sharp pullback looks warranted in the short term. However, some analysts believe the fundamental support for gold remains intact. Deutsche Bank maintains a target price of $6,000 an ounce for gold.

Gold futures stood at $4,886 per ounce on Monday. Silver futures traded at $78.4 per ounce. Platinum and palladium also retreated. The Bloomberg Dollar Spot Index rose 0.1% after gaining 0.9% in the previous session.

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