Gold price silver fall: Precious metals hit by volatility

The precious metals market has been rocked by sudden volatility, with gold price silver fall trends alarming investors after silver recorded its steepest decline since the Covid pandemic and gold prices followed sharply lower. Thin trading conditions during the festive period, combined with speculative excess and regulatory tightening, have been blamed for dramatic swings that wiped billions off market values in a matter of hours.

Silver prices plunged by around 11 per cent on Monday, dropping to roughly $72 (£53.36) per ounce after briefly surging to a new intraday high close to $84 earlier in the session. The speed and scale of the reversal stunned traders and sent shockwaves through commodity markets. Gold was not spared from the turbulence, with prices sliding to about $4,332 per ounce, marking one of the sharpest single-day pullbacks of the year.

The sell-off came after exchange operator CME Group announced an increase in margin requirements for silver futures, a move designed to curb excessive risk-taking in an increasingly volatile market. Higher margins mean traders must put up more cash to hold positions, often forcing leveraged investors to sell rapidly. Market participants said the announcement acted as a catalyst for profit-taking after months of extraordinary gains.

Despite the sudden fall, silver has still enjoyed a remarkable year. Prices have risen by around 150 per cent since the beginning of 2025, when the metal was trading below $30 per ounce. Gold has also posted strong gains, climbing roughly 65 per cent over the same period, although its performance has been overshadowed by silver’s explosive rally. Analysts say the scale of these increases made the market particularly vulnerable to abrupt corrections.

Precious metals have been among the best-performing assets over the past year as investors sought shelter from geopolitical instability, inflation concerns and currency volatility. Ongoing conflicts, heightened tensions between major powers and uncertainty over global monetary policy have all driven demand for traditional safe havens. Gold and silver, long regarded as stores of value, benefited from a surge of capital looking for protection against financial and political risk.

However, experts caution that the same forces pushing prices higher can also amplify volatility. Michael Haigh, global head of commodities research at Société Générale, said that very low trading volumes toward the end of the year had exacerbated price swings. As markets thin out during the Christmas and New Year period, even modest trades can have an outsized impact on prices.

Haigh explained that futures markets become significantly less liquid during the festive season, leaving prices more sensitive to sudden shifts in sentiment. He noted that silver is particularly exposed because its market is far smaller than gold’s. With trading volumes estimated to be around one-tenth of gold’s, large orders can move silver prices dramatically in a short space of time.

This dynamic often leads to rapid reversals. When prices spike sharply, traders who remain active in thin markets tend to lock in profits quickly, triggering abrupt sell-offs. Monday’s dramatic swings were a textbook example of this phenomenon, with silver first surging and then collapsing within hours.

Speculation has played a major role in silver’s recent behaviour. Kathleen Brooks, an analyst at XTB, warned that the metal shows clear signs of a bubble. She pointed out that speculative interest had driven silver prices up by nearly 28 per cent in just the past month, creating conditions ripe for a sharp correction as the year draws to a close.

Brooks said the recent plunge would fuel fears of further instability, particularly if speculative positions continue to unwind. However, she added that strong underlying demand from China could provide some support and limit how far prices fall. Beijing has reportedly been stockpiling silver, a move that reflects both industrial needs and strategic considerations.

China’s influence on the silver market has been growing, especially after authorities announced restrictions on exports of the metal shortly after Christmas. That decision helped trigger the late-year rally by raising fears of supply shortages. When combined with speculative buying, the export news pushed prices rapidly higher before the subsequent collapse.

The latest turmoil also revives memories of October’s unprecedented short squeeze in London, when traders struggled to secure enough physical silver to meet delivery obligations. At the time, record prices punished investors who had bet on a market decline, forcing them to scramble for supplies to cap mounting losses. That episode exposed vulnerabilities in the market’s structure and highlighted how quickly stress can spread when liquidity tightens.

Central bank activity has added another layer of complexity. In recent years, a growing number of central banks have diversified reserves away from traditional assets such as US dollars and into precious metals. Heavy official-sector buying has provided a powerful tailwind for both gold and silver, reinforcing their appeal as alternatives to fiat currencies amid concerns over debt and geopolitical alignment.

Silver’s dual role as both an investment asset and an industrial metal has further complicated price dynamics. Beyond its monetary appeal, silver is a key component in a range of technologies, including solar panels and electronics. Demand from the renewable energy sector has surged as countries accelerate the transition to cleaner energy, adding fundamental support to the market even as speculative excess builds.

Gold, while less volatile than silver, has not been immune to the broader sell-off. Analysts note that gold’s decline reflects spillover effects rather than a sudden loss of confidence in its long-term value. The yellow metal remains near historic highs, underpinned by central bank purchases, inflation hedging and persistent geopolitical risks. Still, the sharp drop serves as a reminder that even traditional safe havens can experience sudden reversals.

Looking ahead, market participants expect continued volatility in the early weeks of the new year as liquidity gradually returns and traders reassess positions. Some analysts believe the correction could ultimately make the market healthier by flushing out excessive leverage, while others warn that further downside cannot be ruled out if speculative sentiment shifts decisively.

For investors, the recent turmoil underscores the risks of chasing momentum in thinly traded markets. While gold and silver continue to play important roles in diversified portfolios, experts stress the importance of understanding liquidity conditions and the impact of regulatory changes such as margin hikes. As 2025 draws to a close, the precious metals rally that defined much of the year has entered a more uncertain and turbulent phase.