First a boom, then a crash: Why did gold and silver prices soar and then suddenly fall?

Gold and silver prices have undergone sharp fluctuations in the past few days. After soaring to record high prices, these precious metal prices crashed last Friday and Monday. This raises an important question—Why did this happen?

What drives gold and silver prices ?

Precious metals are highly valued by investors because of the intrinsic value they hold. Historically, during periods of economic uncertainty, investors tend to shift their wealth into assets such as gold and silver to preserve value.

One of the reasons behind the fluctuations in gold and silver prices is the return of President Donald Trump to the White House. Trump’s governance has caused the US dollar to depreciate in value.According to Alex Kuptsikevich, chief market analyst at FxPro, the dollar’s latest decline stems from former President Trump’s push for tariffs and his pressure on the Federal Reserve to cut interest rates. He told CBS News that these issues have re-emerged in recent weeks following renewed tariff threats and Trump’s remarks indicating he is satisfied with the dollar’s current value.

As a result, investors have increasingly turned to safe-haven assets. Safe-haven assets are those that are expected to retain value during periods of financial instability. Precious metals (especially gold) have long been viewed as a hedge against inflation and economic uncertainty.

With the U.S. national debt reaching $38 trillion dollars, the highest in the world, confidence in the long-term stability of the economic system has weakened, hence increasing demand for safe-haven assets.

Additionally, silver prices were fuelled by speculative trading and growing industrial demand. Electric Vehicles require 25 to 50g of silver each. Each solar panel contains about 20g of silver, and AI data centres rely on silver for semiconductors as well. Individual buyers have also piled into silver. On one of Australia’s most popular online investment platforms for retail investors, CommSec, silver trading activity exploded. It was 1000% higher than the year before!

As investors seek out precious metals to invest in, demand for gold and silver increases, hence causing prices to increase.

Moreover, another factor driving demand has been the purchases made by central banks in emerging economies including Turkiye and China which seek to lessen their dependence on the dollar.

Since last year and the end of January 2026 , gold prices nearly doubled, while silver prices rose nearly four-fold.

On Thursday, gold hit a record peak of almost US $5,595 an ounce, while silver peaked around US $122. However, this strong rally ended abruptly. On Friday, gold prices dropped by roughly 9 percent, while silver plunged by 28 percent. By the end of the day, gold prices had dropped around US$5,068, while silver prices crashed to US$98.50. By Monday, silver prices had declined by around 41% in total to around $72 and gold had lost another 3.3% to $4,545 per ounce.

Why did the prices suddenly crash ?

On Friday, Trump announced he would nominate Kevin Warsh, an American financier and bank executive, as chairman of the Federal Reserve. This choice was widely accepted by investors who had feared that Trump would pick an ally who would reduce interest rates. Lower interest rates encourage borrowing and spending , causing demand to increase. This would lead to a further soar in prices, driving inflation and hence causing the US dollar to weaken even more. The prospect of improved economic stability and an appreciating US dollar led to investors selling off precious metals.

However, many analysts continue to argue that the drop in prices simply reflected the fact that the prices had become overvalued.

What happens next?

"The question everyone is now asking is: What happens next?" Michael Brown, senior research strategist at Australian financial broker Pepperstone, told AFP.

The recent drop in silver and gold prices was short-lived. By 0800 UTC/GMT on Tuesday, gold had risen more than 6%, while silver was trading over 12% higher.

JP Morgan analysts expect gold to reach $6,300 an ounce—a 30% increase from current levels—by the end of 2026. Michael Hsueh, a metals analyst at Deutsche Bank, also suggested the downturn would be temporary, maintaining the bank’s year-end gold price forecast of $6,000, and noting that “conditions do not appear primed for a sustained reversal in gold prices.”

Central banks continue to buy gold to diversify reserves and protect against currency and geopolitical risks. Deutsche Bank also highlighted strong, ongoing purchases from individual investors, particularly in Asia, where gold is viewed as a hedge against currency depreciation and a portable store of wealth.

Moreover, many analysts believe silver’s rally still has room to grow. Industrial demand continues to rise, while supply remains tight after years of underinvestment in exploration and mining.

For these reasons, demand for precious metals is likely to remain high, supporting further price increases.

Credits:

https://www.dw.com/en/why-gold-and-silver-prices-suddenly-collapsed/a-75758156 https://www.aljazeera.com/amp/economy/2026/2/3/gold-and-silver-prices-soared-then-plummete d-whats-going-on https://www.channelnewsasia.com/commentary/silver-and-gold-price-crash-what-investors-need -know-5900721 https://www.forbes.com/sites/conormurray/2026/02/02/gold-and-silver-price-plummets-dont-wor ry-analysts-heres-why/ https://goldprice.org/gold-price-today