3 reasons why gold and silver prices are suddenly dropping

Commodities investors have ridden a profit wave in 2025, with gold and silver shining a path to profit for protection-minded portfolio players.

First up is gold, which has risen about 56% in value in the past year and is up 60% year to date, as measured by the benchmark SPDR Gold Shares (GLD) ETF.

Silver has soared even higher, rising 62.6% over the past year and up 78.4% year-to-date, as measured by the benchmark iShares Silver Trust (SLV).

Over the past week, however, both precious metals have taken a downward turn, with gold losing 2% and silver down 5%. That trend has persisted: As of Tuesday afternoon, GLD was down 6% on the day while SLV was down 7.9%, as investors have pivoted on their precious metals allocations.

“The upside in gold and silver seems to have run out of steam at the start of the week,” said Daniela Sabin Hathorn, senior market analyst at Capital.com. “The trade had become quite overcrowded and was running a little hot considering the levels both markets were at, so a reversal is not entirely out of the blue.”

Here’s why gold and silver prices have reversed course

Hathorn said commodities investors shouldn’t hit any panic buttons over gold and silver’s short-term woes. At least not yet.

“Both gold and silver were primed for a pullback, so there is likely some profit-taking, which has deepened the reaction,” Hathorn noted. “The fundamentals haven’t changed, with long-term support still in place. However, the strength of the rally over the past month was somewhat unjustified, leading to the chance of a deeper pullback on the back of this news of positive trade developments.”

That’s not the only reason gold and silver prices have reversed in the past week, according to commodity markets, with these three factors particularly driving prices down.

A Shanghai surprise is in play

One reason why gold and silver prices are reversing is that margin requirements on the Shanghai Exchange were raised last week, forcing a sell-off that spread from Asia into the rest of the world.

“The steepness of the retracements we’re seeing is an indicator that some of the current rally has been driven by speculation,” said Brett Elliott, director of marketing at American Precious Metals Exchange (APMEX ).

The metals market is tightening up

Another root cause for silver’s rally is a tightness in physical supply, which hasn’t been alleviated yet, and could be shaking investors’ confidence.

“A steep selloff as weaker hands and speculators get shaken out wouldn’t be surprising, but I’m not sure that would stop a rally driven by a physical shortage,” Elliott noted. “It certainly hasn’t stopped platinum.”

U.S.-China geopolitical angst is weighing against major metals markets

One reason why gold prices were up in the first place were concerns over U.S.-China relations.

“That’s specifically the case as speculation that China may be allocating away from U.S. Treasury Bonds and into gold as their primary safe haven,” said Wyatt McDonald, president at Coinfully, a coin collectors' services market. “That’s led to an expected drop in interest rates along with a potential decline in the dollar.”

Metals and other markets move primarily based on what investors think is going to happen, not what has happened, McDonald said.

“When new information comes out that puts those expectations into question, prices adjust,” he added. “Gold has become a popular trade recently, and that is evident in the price run-up we have seen so far. In this kind of environment, it doesn’t take much to spook investors and motivate them to take some profits off the table. This is most likely what we are seeing right now.”

Assess your own risk for market volatility

If the current rise in market volatility in gold and silver is excessively worrisome, it’s time to take a candid look at your precious metals exposure.

“Given the run-up and the uncertainty in the global economy at the moment, metals are likely to be volatile like today,” McDonald said. “If you’re not comfortable with that volatility, then maybe reconsider a large allocation. If you don’t mind the volatility and have a strong belief that they will continue to increase over time, then that’s a different story.”