Gold Plunge Deepens: Metals Rout Continues as Decade-Long Rally Unravels

(Market Watch) -- The great precious metals rally of the past year has hit a wall. Gold prices extended their sharpest decline in over a decade on Monday, as a powerful wave of selling continued to wash away the historic gains that had defied expectations. Silver joined the plunge, suffering its most significant intraday drop on record in the previous session.

In early Asian trading, spot gold fell as much as 4%, while silver shed a similar percentage to cling above $80 an ounce, after briefly cratering by 12%. The sell-off marks a stark reversal for assets that had become havens for investors worried about geopolitical instability, currency devaluation, and central bank policy.

"The air is coming out of the balloon, and it's happening fast," said Robert Gottlieb, a former JPMorgan Chase precious metals trader turned independent commentator. "This isn't over. We need to see where real support emerges. The trade was simply overcrowded—everyone was on the same side of the boat."

The immediate catalyst for Friday's initial collapse was political. News that President Donald Trump would nominate Kevin Warsh—a known inflation hawk—to lead the Federal Reserve sent the U.S. dollar soaring. A stronger dollar typically pressures dollar-denominated commodities like gold, undermining the bets of investors who had anticipated a more dovish, weak-dollar policy from the administration.

Analysts note, however, that the market was a tinderbox ready to ignite. The meteoric rise in prices, particularly through January, had stretched risk models and attracted a record flood of speculative call options. Goldman Sachs analysts pointed out last week that this options activity created a "mechanically reinforcing" upward spiral, as sellers were forced to buy the underlying metal to hedge their positions—a dynamic that violently reversed when sentiment turned.

As of 8:05 a.m. Singapore time, gold was down 2.2% at $4,784.54 an ounce. Silver fell 2.1% to $83.30. Platinum and palladium also traded lower. The Bloomberg Dollar Spot Index held steady after its recent gain.

Market Voices:

• Eleanor Vance, Portfolio Manager at Sterling Trust: "This is a necessary and healthy correction. The fundamentals for gold haven't disappeared—global debt levels and geopolitical tensions are still elevated. This shakeout removes the weak hands and creates a better entry point for long-term holders."
• Marcus Thorne, Chief Economist at Alton Research: "The Warsh nomination is a paradigm shift. It signals a potential return to orthodox monetary policy focused on price stability. If confirmed, the era of easy money that fueled this commodities boom could be drawing to a close."
• Jake Rinaldi, Independent Trader (via social media): "Are you kidding me? This is a classic pump and dump on a galactic scale. The big banks talked up the rally, retail piled in, and now they're getting slaughtered. The so-called 'safe haven' just proved it's as manipulated as everything else."
• Dr. Anya Sharma, Commodities Strategist at Global Insight: "Don't overlook the technical damage. The velocity of this drop has broken key multi-year trendlines. The psychology of the market has shifted from 'buy the dip' to 'sell the rally.' It will take time and consolidation to rebuild confidence."