Following a historic rally in which gold and silver rose to unprecedented highs, both metals encountered stiff resistance this week, triggering a sharp pullback driven by profit-taking, macroeconomic uncertainty, and heightened volatility across financial markets. With gold plunging from nearly $5,600 per ounce to $5,100 before rebounding to $5,300, and silver slipping more than 11% after touching a record $121 per ounce, traders are reassessing the underlying drivers of the rally and whether it has entered a so-called “dangerous phase.”
Gold’s meteoric rise of more than 20% year to date was largely propelled by a weakening U.S. dollar, dovish expectations from the Federal Reserve, and a surge in demand from private investors and central banks seeking safe-haven assets amid geopolitical and economic uncertainty.
Just last week, Goldman Sachs reaffirmed its bullish outlook, setting a year-end gold price target of $5,400. The rally intensified after the Federal Reserve chose to keep rates unchanged, sending the dollar (DX-Y.NYB) to its lowest levels since early 2022. Robin Brooks of the Brookings Institution called the dollar’s slide a sign of strong conviction in the “Dollar-down” trade, which he said was “super-charging the debasement trade.” But by Thursday, the rally had unraveled. Gold lost nearly $500 in one day, an 8.7% slide, erasing $3.4 trillion in global market value of above-ground gold. The sudden descent came amid a broader stock sell-off, particularly in technology shares. Microsoft (MSFT) dropped nearly 12% after disappointing cloud and AI-related earnings, dragging the Nasdaq Composite down 2% and dampening sentiment across financial assets.
Silver put on an even more stunning show. The metal jumped over 68% during January, briefly topping $121 per ounce, its strongest monthly gain since December 1979, before tumbling to $107, a drop of nearly 12%.“Silver prices have already significantly overshot our forecasted averages,” noted JPMorgan analysts. “Calling a top is close to impossible in markets displaying near-parabolic price momentum.”
Kathleen Brooks, research director at XTB, echoed that caution, warning that silver was in a “steroid phase” and prices had risen too far too fast. When rapid gains outpace fundamentals, including industrial demand corrections, they can swiftly follow as traders scramble to lock in profits.
Ole Hansen, head of commodity strategy at Saxo Bank, warned that gold and silver have entered a “dangerous phase” where volatility “feeds on itself.”“As price swings intensify, liquidity thins,” Hansen explained. “Banks and market makers struggle to manage risk… when their willingness to quote prices in size fades, liquidity deteriorates, and volatility blows out.”
Simon Biddle, head of precious metals at broker Tullet Prebon, agreed: “Banks don’t have infinite balance sheets to trade precious metals. Trading volumes have decreased as they are taking less risk.”Gold ETF trading volumes spiked to their highest levels since October 2025, but silver ETFs and Comex futures saw declining volume, signaling waning confidence among large market participants.
The ongoing volatility hasn’t been isolated to the metals markets. Base metals and crude oil also retreated after reaching highs earlier in the week, reflecting investor uncertainty. Oil’s decline followed speculation regarding possible U.S. action against Iran, adding further geopolitical tension to an already fragile global environment.
Investors are closely monitoring the evolving Federal Reserve policy. Although rates were held steady this week, speculation remains that a rate cut may come by June, particularly amid signs of slowing economic momentum. Gold’s pullback also coincides with a temporary rebound in the U.S. dollar and stable interest rates, both of which reduce the appeal of non-interest-bearing precious metals.
Contributing to broader volatility in the mining industry, the Trump administration has signaled that it is backing away from commitments to provide guaranteed price floors for U.S. miners of critical minerals. While MP Materials continues to receive government price support under an earlier contract, new projects must now demonstrate financial independence without direct price guarantees.
This shift could undermine investor confidence and has already sparked a sell-off across U.S.-listed mining stocks. Companies such as Trilogy Metals, Critical Metals, and NioCorp Developments saw their shares decline by 3%-9% following the announcement. Australian rare earth stocks also fell sharply.
While some officials cited legal and budgetary constraints for halting price-floor expansion, others suggested that alternative tools, such as tariffs, equity stakes, and tax incentives, could still be used to support a domestic critical-minerals supply chain independent of China’s dominance.
Despite the volatility and price pullbacks, analysts believe the long-term factors driving demand for gold and silver remain intact. Central banks continue to accumulate gold, ETF holdings have risen, and uncertainty over interest rates, inflation, and geopolitical flashpoints could support precious metals over the coming months.
Tether’s recent announcement that it plans to allocate up to 15% of assets to physical gold underscores an evolving investor base for bullion, including tech-savvy and crypto-linked institutions. David Meger of High Ridge Futures suggested that this pullback is likely a “healthy correction,” with investors locking in gains. In his view, gold and silver may stage a recovery if the macro backdrop, namely lower rates and heightened geopolitical risk, strengthens.
For now, analysts advise investors to maintain a steady approach. “Avoid panic selling and remain focused on long-term goals,” said Brian Lan, managing director at GoldSilver Central. “Staggered buying, diversification, and close tracking of Federal Reserve policy and geopolitical developments are key during volatile periods.”
While the gold and silver rally hasn’t ended, it is undergoing a crucial test. The “dangerous phase” created by extreme volatility, low liquidity, and shifting macro dynamics could lead to more wild swings in the short term. However, for investors with a diversified, long-term perspective, the fundamental case for precious metals remains strong even amid the chaos.