Gold and silver's wild ride: From record highs to sudden shock explained

While the market was already stretched, one of the triggers for the selloff came from a sharp change in expectations around US monetary policy.

The first few weeks of 2026 delivered one of the most extreme swings in the history of precious metals, reminding investors that even traditional safe havens are not immune to excess.

 

According to a Mirae Asset Gold & Silver Commodity Update (February 2, 2026), what began as a powerful, conviction-driven rally in gold and silver rapidly reversed into a violent sell-off, wiping out recent gains and exposing fragile liquidity beneath the surface.

 

From record highs to steep corrections

 

Gold and silver surged to all-time highs in late January 2026, fuelled by geopolitical uncertainty, fears of currency debasement, strong ETF inflows and aggressive speculative positioning. 

It is worth noting that despite corrections of over 40% in silver and 20% in gold from their respective peaks, both commodities remain positive on a year-to- date (YTD) basis (refer

 

Gold peaked at $5,595 per ounce internationally (₹1,73,190 per 10 grams)

 

Silver hit $121.65 per ounce, with MCX prices touching ₹4.2 lakh per kg

 

The reversal was swift:

 

By February 2, gold had fallen over 20% from its peak

 

Silver corrected more than 40%, marking one of its sharpest declines on record

 

Despite the correction, both metals remain positive on a year-to-date basis, underlining the scale of the preceding rally.

 

Why silver fell harder than gold

 

The data highlights a key divergence between the two metals.

 

Gold’s rally was largely driven by structural factors—central bank buying, geopolitical hedging and long-term concerns around fiscal sustainability. Silver, however, became increasingly speculative.

 

Mirae Asset notes that silver’s dual role—as both a monetary metal and an industrial input—made it especially vulnerable to momentum-driven flows. As prices surged, silver began trading more like a leveraged risk asset, rather than a hedge 

 

Speculative capital—particularly from China—poured into commodities, compressing liquidity and amplifying price moves. Derivatives markets added further fuel, with heavy futures and options positioning mechanically pushing prices higher until the trade became overcrowded.

 

The trigger: a sudden shift in the dollar narrative

 

The sell-off was triggered by a sharp change in expectations around US monetary policy. Reports that Donald Trump may nominate Kevin Warsh as Federal Reserve chair prompted a reassessment of the US dollar outlook.

 

Warsh is widely viewed as a more orthodox inflation fighter, raising fears of tighter financial conditions. The dollar strengthened quickly, margins on derivatives trades were raised, and the “currency debasement” narrative that had underpinned the metals rally began to unwind.

 

Once prices turned, stop-losses, margin calls and forced liquidation followed, turning a correction into a wholesale exit.

 

ETF flows reveal who was selling

 

Crucially, the data shows this was not panic selling by physical holders.

 

Jewellery and bar demand remained largely stable

 

The selling pressure came primarily from financial players, fast-money strategies and leveraged positions

 

Trading volumes in major silver ETFs surged to levels usually seen in mega-cap equities

 

This confirms the sell-off was driven by positioning rather than fundamentals.

 

Post-crash outlook: gold steadier, silver cautious

 

Despite the sharp fall, Mirae Asset believes gold’s long-term investment case remains intact. Central bank diversification, geopolitical risks and fiscal concerns have not disappeared overnight. As leverage reduces and positioning normalises, gold may find firmer footing.

 

Silver’s outlook is more complex. Its smaller market size and higher speculative participation make it inherently more volatile. The collapse has broken the perception of a “one-way trade,” and investors appear far more cautious.

 

The data reflects this divergence clearly:

 

Gold is still up 8.5% year-to-date

 

Silver is up just 1.4% year-to-date, after extreme volatility 

  Gold vs Silver: Diverging Paths Post-Crash

Despite the violence of the move, it is important to distinguish between gold and silver as the dust begins to settle. 

 

"Gold’s long-term thematic support is likely to remains intact. Central bank diversification, geopolitical hedging, and concerns about fiscal sustainability have not disappeared in a matter of days. While positioning was clearly excessive, the underlying investment case has merely been interrupted, not invalidated. Once selling pressure subsides and leverage is reduced, gold may find firmer footing," noted the report. 

 

Silver’s outlook is more complex. Its smaller market size and greater interreference by speculative flows make it inherently more unstable.  

Sources: Bloomberg, Bloomberg News, Bloomberg Research, Bloomberg Economics. The

   

What this means for wealth portfolios

 

The episode underscores an important lesson for investors: even safe-haven assets can become crowded trades.

 

Mirae Asset suggests trimming excess exposure to precious metals and realigning portfolios with long-term strategic allocations. While volatility may persist in the near term, gold currently offers a more favourable risk-reward profile than silver, especially in an environment of heightened uncertainty.

 

For  investors, the message is clear—use gold as insurance, not a momentum trade, and treat silver with caution until speculative excess fully unwinds.

  "The recent collapse broke the perception of a “one-way trade,” which may discourage aggressive positioning in the near term. At the same time, the easing of speculative tightness could help normalize physical availability, particularly in China. Early signs suggest that while gold has already begun to attract dip buyers, especially ahead of seasonal demand around the Lunar New Year, silver investors are far more cautious," said the report. "For now, we maintain a cautious stance on silver following its parabolic move and had suggested trimming overallocation to precious metals to realign portfolios with long-term strategic allocation levels While it remains prudent to await greater clarity and trend confirmation, gold appears relatively better positioned on a risk–reward basis. In the current environment of heightened uncertainty, a gold–silver allocator remains a preferred investment approach. That said, when assessed independently, Gold currently offers a relatively more favourable risk–reward profile," said the report.