Precious metals experienced a dramatic reversal Friday, ending a months-long rally that saw gold approach $5,000 and silver exceed $100 per troy ounce. The sharp declines-7.07% for gold and 20% for silver-followed the confirmation of Kevin Warsh as the next Federal Reserve Chairman and a subsequent rebound in the U.S. dollar, halting gains fueled by geopolitical uncertainty and shifting monetary policy expectations. While still showing substantial monthly increases, the sell-off highlights the volatility inherent in these markets and the sensitivity to major economic and political developments.
Gold and silver experienced their steepest declines in years on Friday, reversing a powerful rally that had driven prices to record highs, according to Bloomberg.
The price of gold fell 7.07% to below $5,000 per troy ounce – reaching $4,992 as of 6:50 PM Bulgarian time – while silver plummeted 20% to under $100 per troy ounce, landing at $92.96. Broader metals markets were swept up in the sell-off. Copper prices also declined nearly 4% in London, following a surge on Thursday that saw the metal break above $14,000 per ton for the first time, marking its largest single-day increase since 2008.
A wave of investor demand for precious metals over the past year fueled record-breaking gains, unsettling seasoned traders and creating significant price instability. This trend accelerated in January as investors sought traditional safe-haven assets amid concerns about currency devaluation, Federal Reserve independence, trade wars, and geopolitical tensions. The recent price volatility underscores the sensitivity of these markets to global economic and political developments.
Despite heading toward substantial monthly gains, Friday’s sell-off represented the most significant disruption to the rally since a similar drop in October 2025. The decline was triggered by a rebound in the U.S. dollar following reports that the Trump administration was preparing to nominate Kevin Warsh as Federal Reserve Chairman. The nomination has since been confirmed. The strengthening of the American currency undermined sentiment among investors who had been buying metals after the President signaled he would allow the dollar to weaken.
Analysts had anticipated volatility in precious metals, as rising prices and increased turbulence put pressure on risk models and trader balances. A record surge in call option purchases – contracts giving holders the right to buy at a predetermined price – also “mechanically amplified the upward price momentum,” according to a note from Goldman Sachs Group, as option sellers hedged their exposure to rising prices by making further purchases.
The decline in gold prices may have been accelerated by what is known as gamma squeezing. This occurs when traders with short option positions are forced to buy more futures contracts or, in this case, gold-backed exchange-traded funds, as prices rise above key option strike prices, and sell when prices fall below those levels to maintain portfolio balance. SPDR Gold Shares ETF saw large positions expiring on Friday at $465 and $455, while on Comex, significant March and April options were positioned at $5,300, $5,200, and $5,100.
Despite the downturn, gold remains up approximately 18% in January and is on track to record one of its sharpest monthly increases since 1980. Silver’s surge has been even more dramatic, with the white metal gaining over 40% since the start of the year.
The extent of the correction “shows that market participants were simply waiting for an opportunity to take profits after the rapid price increase,” analysts at Commerzbank noted in a Friday report. However, while the Warsh nomination rumors may have triggered the sell-off, there is a high probability that the Fed “will exert downward pressure on interest rates to a greater extent than currently expected,” Commerzbank added.
Meanwhile, a new federal government shutdown was averted after Trump and Senate Democrats reached a tentative agreement. The White House continues to negotiate with Democrats on implementing new restrictions on immigration operations, which have sparked national outrage.
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