After a sharp rise in volatility in recent days, gold and silver have corrected heavily in what could be the biggest crash in history. Let’s take stock of the situation.
Gold and silver correct sharply
After weeks of gains, precious metals experienced what is probably the biggest crash in financial market history on Friday. Spot prices fell 9.6% for gold, 26.29% for silver, 5% for copper, and 15% for palladium. In total, $7 trillion in market capitalization vanished in the space of 36 hours. Falling to $85 per ounce, silver experienced its worst day since 1921, while the gold futures chart shows a decline of nearly 13% from its all-time high (ATH):
Having fallen from $5,600 to $4,700 in less than two days, an ounce of gold is now valued at $4,908 on the financial markets, wiping out a week of gains.
On X, the StockMarket.News account shares an interesting theory that the announcement of the next chair of the US Federal Reserve (Fed) may have played a role. On Friday, Donald Trump nominated Kevin Warsh to succeed Jerome Powell as chair of the Fed’s Board of Governors. Based on his past experience, Kevin Warsh is considered by many observers to be a staunch opponent of inflation, or at least of tools that weigh on the Fed’s balance sheet, such as quantitative easing. According to StockMarket.News, this is what surprised the financial markets, which were betting on a more accommodating profile in line with Donald Trump’s demands and a weakening of the dollar.
Nevertheless, Kevin Warsh has also recently expressed support for rate cuts, and if his nomination is confirmed by the Senate, we should quickly get a sense of the policy he intends to implement at the Fed.
It should also be noted that Donald Trump’s announcement was made several hours before the peak of the crash in precious metals. Furthermore, the increase in volatility in this asset class had already been observed for several days.
In any case, the fact is that the chain reaction inherent in this type of movement has taken place on an unprecedented scale, with leveraged positions being liquidated and forced sales leading to further forced liquidations, which in turn accentuate the chain reaction.
In recent days, we have warned you about FOMO syndrome, which can easily take hold in such phases of euphoria. While there is nothing to prevent the market from rebounding after such a purge, we reiterate our call for caution in light of the risks that such volatility entails for an ill-prepared investor.
