Market Madness: Why Precious Metals Went from Record Highs to Turmoil

By Paul T. Murray

Gold and silver have drawn renewed attention in early 2026 — and not without reason. After reaching record highs following an exceptional run in 2025, both metals have experienced sharp declines. Silver, in particular, has seen extreme volatility.

For many investors, the key question is whether something fundamental has changed. In short, it has not. What we are seeing is best described as a repricing of expectations rather than a breakdown in the underlying case for precious metals.

The Context: A Powerful Run in 2025

Gold and silver entered 2026 after one of their strongest periods in decades. Prices were supported by inflation concerns, heavy central bank buying, geopolitical uncertainty, and growing unease about global fiscal discipline.

That rapid advance attracted speculative activity and leverage — a typical feature of fast-moving markets. When prices rise quickly, markets tend to become more vulnerable to abrupt reversals.

What Drove the Recent Decline

Several factors converged over a short period of time:

• Shifting interest-rate expectations. Signals that monetary policy may remain restrictive for longer reduced the appeal of non-income-producing assets such as gold. This concern was reinforced by the announcement of Kevin Warsh as the next Federal Reserve Chair. Warsh is generally viewed as less inclined toward aggressive rate cuts, which pushed expectations for higher real interest rates.
• A stronger U.S. dollar. Because precious metals are priced in dollars, a rising dollar often pressures metal prices in the short run.
• Forced liquidations. Higher margin requirements and crowded positioning led to rapid selling, particularly in silver, which is structurally more volatile.

Together, these forces produced a swift correction rather than a gradual reassessment.

What Are Real Interest Rates?

Real interest rates are simply interest rates adjusted for inflation. When real rates rise — meaning investors can earn a higher return after inflation in cash or bonds — assets like gold and silver, which do not generate income, tend to become less attractive in the short term.

Expectations for higher real rates were a key driver of the recent pullback.

Why Silver Was Hit Harder Than Gold

Silver occupies a unique position, reflecting both investment demand and industrial use. As a result, its price is influenced by economic expectations as well as investor sentiment.

Historically, this dual role makes silver more volatile than gold in both directions. The recent decline, while dramatic, is consistent with that long-standing behavior.

Has the Long-Term Case Changed?

The broader forces supporting precious metals remain largely intact:

• Central banks continue to treat gold as a strategic reserve assets.
• Government debt levels remain elevated.
• Inflation risks persist, even if temporarily muted.
• Geopolitical and policy uncertainty remain ongoing features of the global environment.

What has changed is sentiment — not necessarily fundamentals.

The Bottom Line

The recent turmoil in gold and silver appears less like a structural breakdown and more like a sharp reset following an extended advance. Volatility is uncomfortable, but it is not unusual — particularly after a year like 2025.