Precious Metals Experience Major Shakeup: What Does It Mean for the Market?

First, the conclusion: this wave of intense volatility is a “bubble squeeze + leverage washout” in a bull market, similar to multiple historical major corrections (such as after 2011). In the short term, there is downward pressure (increased volatility and potential overshoot), but the medium- to long-term bullish pattern remains intact. Investors should enhance risk awareness: avoid chasing highs and selling lows, control leverage, and monitor Federal Reserve/US dollar developments. Physical gold and silver or ETFs are suitable for long-term allocation, while short-term traders are advised to wait until the dust settles (possibly around February-March for a bottoming signal).
The core reason for short-term declines: Trump’s nomination of “hawkish” Kevin Warsh as Federal Reserve Chair was interpreted by the market as increased Fed independence, shrinking balance sheet, and expectations of mild rate cuts (not overly dovish). The US dollar index quickly strengthened, real interest rates rose, suppressing non-yielding assets like gold and silver. Additionally, the extreme rally before January (gold RSI hitting a 40-year high) accumulated large profit-taking and leveraged speculation (especially in high-beta silver). Once sentiment reversed, it triggered stop-loss/margin call chain reactions, and liquidity drying up amplified volatility.
Impacts:
① Short-term (next few weeks to 1-3 months): volatility will continue to increase, possibly even leading to a “second bottom.”
② Medium- to long-term (full year 2026 and beyond): most institutions remain bullish; intense fluctuations do not change the bull market logic, but rather represent a “healthy adjustment.”
Supporting factors: central banks continuously buying gold (de-dollarization), global debt/fiscal deficits expanding, stubborn inflation, geopolitical structural risks (not single events), physical demand rebounding (price declines stimulating jewelry/investment buying). Goldman Sachs forecasts gold at $5,400 by the end of 2026, Heraeus range of $3,750-$5,000, and J.P. Morgan and others more optimistic at up to $6,300. Silver industrial demand (photovoltaics, hydrogen energy, AI data centers) plus supply-demand gaps remain strong; despite large volatility, elasticity is higher.
Downside risks: if the Fed unexpectedly tightens, economic recession suppresses industrial demand (silver more affected), or leverage is thoroughly cleared leading to a liquidity crisis, the bear market could continue in the short term. However, the core narrative (US dollar credit deterioration, safe-haven asset revaluation) remains unchanged, and bulls are likely to return after the correction.