Gold and Silver Extend Losses as Dollar Strength, Fed Uncertainty Erode Record Highs

Gold and silver prices retreated sharply on Monday, deepening last week’s historic sell-off as a stronger U.S. dollar, profit-taking and shifting expectations for Federal Reserve policy continued to weigh on the precious-metals market. Spot gold fell about 5% to $4,611.40 per ounce, widening the near-10% slide recorded on Friday when prices broke below the $5,000 threshold for the first time in six weeks. Silver, which had mirrored gold’s earlier ascent, dropped more than 10% to $76.1138 per ounce as of 11:03 p.m. ET.

Monday’s decline follows a violent reversal that began late last week. Until early Thursday morning, both metals were hovering near record peaks—just under $5,600 for gold and approximately $122 for silver—after months of steady gains built on safe-haven demand, expectations of lower U.S. interest rates and persistent geopolitical risks. The sudden pivot has erased a substantial portion of those advances, though both metals remain higher for the year: silver is still up roughly 16% since January, and gold is about 8% above its New Year level.

Dollar Rebounds on Fed Leadership Shift

The immediate catalyst for the sell-off was a shift in monetary-policy expectations after President Donald Trump on Friday nominated former Federal Reserve governor Kevin Warsh to succeed Chair Jerome Powell when Powell’s term expires in May. Warsh has publicly advocated tighter policy to counter inflationary pressures, a stance that contrasts with the market’s earlier assumption that the Fed would maintain an aggressive rate-cutting trajectory in 2026.

News of Warsh’s selection lifted the U.S. Dollar Index by roughly 0.8% between Thursday and Monday, reflecting renewed confidence in U.S. assets and prompting a rotation out of non-interest-bearing alternatives such as bullion. A firmer greenback typically makes dollar-denominated commodities more expensive for buyers using other currencies, thereby curbing demand for gold and silver. Heightened Treasury yields have further eroded the appeal of precious metals by boosting the relative return available from fixed-income securities.

Market strategists said last week’s abrupt swing also reflected traders’ desire to lock in gains after an unusually rapid run-up. Gold prices had surged more than 40% between September and early January, while silver more than doubled over the same period, driven by heavy inflows into exchange-traded funds and momentum-oriented algorithmic strategies. Once the Fed leadership narrative shifted, many investors opted to secure profits, accelerating the decline.

Geopolitical Backdrop Eases

Adding to the pressure, White House comments on Friday indicated the administration could pursue a diplomatic agreement with Iran, a development that briefly soothed concerns about a wider conflict in the Middle East. As geopolitical risk premiums faded, West Texas Intermediate crude dropped about 4% on Monday, underscoring a broader retreat in commodity prices. Reduced demand for safe-haven assets left gold and silver vulnerable to further liquidation.

While the magnitude of last Friday’s drop—nearly 10% for gold and an unprecedented 30% for silver—prompted comparisons to the 1980 silver crash, analysts framed the move as a correction rather than the start of a bear market. They noted that both metals had climbed to “overbought” levels prior to the reversal, making the market susceptible to an “air pocket” once momentum shifted.

Volatility Expected to Persist

In the short term, traders are bracing for heightened price swings as they await clearer guidance on Warsh’s policy outlook. Confirmation hearings are scheduled for late February, and the March Federal Open Market Committee meeting is now viewed as a pivotal test of the central bank’s direction. Should Warsh signal a willingness to hold or even raise rates, the dollar could extend its advance, keeping precious-metal prices under pressure. Conversely, any indication that the Fed will maintain an easing bias could revive dip-buying interest in bullion.

Historical data highlight the close relationship between real yields and gold. According to information available from the Federal Reserve, periods of declining inflation-adjusted Treasury returns have consistently corresponded with stronger gold prices, while rising real yields tend to have the opposite effect. With benchmark 10-year yields moving higher in recent sessions, real returns have turned less negative, reinforcing the headwind facing precious metals.

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Performance Snapshot

Even after the latest slide, gold remains one of the top-performing major assets of the past 18 months. The metal rallied about 65% in 2025, its strongest calendar-year gain since 1979, as investors flocked to perceived havens amid global monetary easing and regional conflicts. Silver’s 145% leap last year outpaced every component of the S&P GSCI commodity index, propelled by industrial demand expectations and speculative interest.

This year’s positive returns, though trimmed, still reflect lingering macroeconomic uncertainties. Sluggish growth in parts of Europe and Asia, coupled with uneven readings on U.S. inflation, continue to support arguments for holding a portion of portfolios in precious metals. However, analysts caution that fresh catalysts are required to renew the thrust toward last week’s highs.

Key Levels and Market Outlook

From a technical perspective, traders are monitoring $4,500 as initial support for gold. A decisive break below that threshold could expose the metal to further downside toward the 100-day moving average near $4,320. Resistance is seen at $4,900, followed by the $5,000 psychological barrier. For silver, immediate support lies around $75, with additional buying interest expected near $70. On the upside, $85 and $90 mark the next resistance zones.

Looking ahead, market participants point to three variables that could determine the trajectory of precious-metal prices over the next quarter:

• The tenor of Warsh’s policy guidance during confirmation hearings and subsequent Fed meetings.
• Movements in the U.S. dollar and real Treasury yields, both of which directly influence the opportunity cost of holding bullion.
• Evolving geopolitical developments, particularly in the Middle East, that might reignite demand for safe-haven assets.

For now, consensus forecasts call for elevated but volatile price action, with most banks maintaining year-end gold targets between $4,800 and $5,200. Silver projections range from $80 to $100, contingent on industrial demand trends and investor appetite for risk. Strategists note that a renewed bout of dollar weakness, or evidence that the incoming Fed chair favors a gradual policy path, could quickly restore upward momentum.

Crédito da imagem: Yasser Al-zayyat | AFP | Getty Images