Volatility has a grip on the precious metals market after months of big gains. Will investors bail?
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The SPDR Gold Shares ETF tells the story plainly: gold has added about 56% over twelve months and is sitting on a 60% gain just since January. Silver has been the bigger winner — the iShares Silver Trust puts it at 62.6% over the last year and nearly 78.4% through the year so far. For anyone who bet on precious metals in 2025, it has been a hard run to complain about.
Daniela Sabin Hathorn, senior market analyst at Capital.com, wasn't surprised. "The upside in gold and silver seems to have run out of steam at the start of the week," she said. "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."
Hathorn isn't sounding any alarms. "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."
Three factors are behind the reversal.
Last week the Shanghai Exchange moved to hike margin requirements — a decision that set off a wave of selling that began in Asia and crossed into every major market. Brett Elliott, director of marketing at APMEX, said the scale of the drop points to something specific. "The steepness of the retracements we're seeing is an indicator that some of the current rally has been driven by speculation," he said.
Silver's supply problem hasn't gone away — the physical market is still stretched, and some investors are starting to feel that pressure. Elliott isn't convinced it kills the rally though. "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," he said. "It certainly hasn't stopped platinum."
The third is U.S.-China tension, which was one of the key forces pushing gold higher to begin with. Wyatt McDonald, president at Coinfully, broke down the thinking behind it. "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," he said. "That's led to an expected drop in interest rates along with a potential decline in the dollar."
Markets price in expectations, not history — and when those expectations shift, prices move fast. "When new information comes out that puts those expectations into question, prices adjust," McDonald said. "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."
For anyone rattled by the swings, McDonald keeps it simple. "Given the run-up and the uncertainty in the global economy at the moment, metals are likely to be volatile like today," he 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."
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