Historic crash in gold and silver: bubble burst or opportunity to re-enter a bull market?

A sharp short-term correction within a broader uptrend

The recent daily decline in gold and silver prices has been exceptionally severe – the largest seen so far this century. However, when viewed from a longer-term perspective using weekly charts, the move appears less dramatic.

On this timeframe, prices have not broken the sequence of higher highs and higher lows that has characterised the trend in recent years. Both metals remain comfortably above long-term reference levels such as the 52-week moving average.

From this perspective, the recent sell-off can be interpreted as a technical correction within an ongoing bull market rather than a definitive trend reversal. A Fibonacci retracement of the last six months of upward movement suggests that gold futures are approaching a correction of around 50%, a level that often attracts renewed buying interest.

Kevin Warsh, a stronger dollar, and pressure on alternative assets

The immediate catalyst for the decline was the emergence of Kevin Warsh as a leading candidate to chair the US Federal Reserve. Warsh is widely viewed as one of the most hawkish and orthodox figures under consideration.
He has previously criticised the expansion of the Federal Reserve’s balance sheet, and markets have interpreted his potential appointment as signalling tighter monetary conditions and reduced liquidity in the future.

As a result:

• The US dollar has strengthened

• Government bond yields have risen

• Assets seen as alternatives to fiat currency, such as precious metals, have come under pressure

At the same time, major cryptocurrencies – particularly Bitcoin and Ethereum – have broken below key support levels established in November and are now trading beneath long-term moving averages. This has reinforced a broader risk-off tone across markets.

Market top or strategic opportunity?

The central question for investors is whether gold and silver are forming a long-term top, or whether the current weakness represents an opportunity to re-enter positions at lower levels.

There are several factors that continue to support a constructive medium- to long-term outlook:

• High global debt levels and ongoing geopolitical and economic uncertainty continue to underpin demand for defensive assets.

• Long positions in gold and silver appear to be largely fundamentally driven, rather than the result of excessive speculative positioning.

• Flows into major gold and silver ETFs – such as GLD and SLV – remain positive for now.

Despite recent volatility, precious metals have increasingly become core components of diversified institutional portfolios. That said, short-term price swings have intensified, with gold’s volatility at times exceeding that of Bitcoin, underlining the importance of disciplined risk management.

Near-term focus: US dollar and economic data

In the short term, the direction of precious metals – and commodities more broadly – is likely to depend on whether the US dollar continues to strengthen following Warsh’s nomination.