Precious Metals Plunge: Gold and Silver Suffer Historic Sell-Off as Rally Unravels
In a stunning reversal of fortune, precious metals markets were rocked by a historic sell-off on Friday. Gold futures (GC=F) plunged more than 10%, heading for their worst single-day performance in decades, while silver (SI=F) cratered over 20% in its largest recorded daily drop. The dramatic moves wiped out a significant portion of this year's aggressive rally, sending shockwaves through commodity markets.
The volatility spilled over into equities, with major indices trending lower. Market sentiment was further influenced by President Trump's nomination of Kevin Warsh, a historically hawkish figure, to lead the Federal Reserve. The selection was interpreted by some analysts as a move to reinforce the central bank's inflation-fighting credibility, which may have pressured non-yielding assets like gold.
"This was a classic bubble deflation," said Michael Chen, a veteran portfolio manager at Horizon Capital. "The momentum became parabolic, driven more by speculative fervor than fundamentals. When liquidity at the margins dries up, the unwind is violent and indiscriminate—silver, being the thinner market, simply got crushed."
Analysts had been sounding alarms. Ole Hansen, head of commodity strategy at Saxo Bank, warned Thursday that the surge was "entering a dangerous phase," citing self-feeding volatility and thinning liquidity. Bloomberg's senior commodity strategist, Mike McGlone, noted that such rapid price increases often precede enduring peaks, particularly for silver.
The sell-off marks a sharp contrast to the bullish narrative of just days ago. Gold had briefly soared past $5,500 an ounce after the latest Fed meeting, fueled by a weakening dollar and rampant investor appetite. Goldman Sachs had recently set a year-end target of $5,400, citing strong private-sector demand.
"This is a catastrophic failure of risk management for the retail crowd that piled in last week," argued Lisa Moreno, an independent trader and frequent market commentator on social media. "The big institutions talked their book on the way up and are now harvesting profits. The little guy is left holding the bag again. It's predatory."
David Park, a financial advisor with SecurePath Planning, offered a more measured perspective. "While the scale of the drop is alarming, it's a necessary correction that restores some sanity to the market. For long-term investors, this might eventually present a better entry point. The macro drivers for gold—geopolitical risk, debt concerns—haven't disappeared overnight."
Silver, which had skyrocketed above $120 an ounce during the rally, was trading near $87 by Friday's close. Despite the plunge, the metal remains up roughly 28% for the year, a testament to the sheer scale of its prior gains.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.
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