In Brief:
- Gold fell over 6% and silver dropped more than 14% as a parabolic rally began to unwind.
- Profit-taking, month-end book balancing, and news of a potential new Fed chair added to selling pressure.
- Volatility remains high, with investors advised to stay on the sidelines as metals digest recent gains.
Gold and silver saw heavy selling over the past two sessions, with gold down more than 6% on Friday and silver sliding over 14%.
Much like silver earlier in the week, gold showed clear signs of a blow-off top on Thursday as selling swept across metals, equities and crypto.
After a parabolic run of this scale, a pullback was inevitable, with the market now working through a much-needed reset.
Several factors added to the speed of the move, with profit-taking after record highs, month-end book balancing, and reports that the US is close to naming a new Federal Reserve chair.
Gold hit an all-time high of $5,594.82 on Thursday and is still heading for a monthly gain of more than 15%, marking a sixth consecutive monthly rise and its strongest monthly performance since 1999.
Despite the sharp pullback, many of the longer-term supports for gold remain intact. After the aggressive rally of recent weeks, a period of consolidation would be a healthier outcome for the market.
US President Donald Trump said on Thursday he will announce his pick for the next Fed chair on Friday, with former Fed governor Kevin Warsh seen as a leading contender. Warsh has argued for a smaller Fed balance sheet, a stance that contrasts with Trump’s preference for looser monetary conditions.
The US dollar also rebounded on Friday, recovering from a slide to a four-year low. A firmer dollar increases the cost of gold for overseas buyers and added pressure to prices.
Silver fell more than 14% to $99.55 an ounce after hitting a record $121.64 on Thursday. Even after the sell-off, the metal is still up around 42% this month, on track for its strongest monthly gain on record.
While part of silver’s surge was grounded in genuine supply and demand factors, speculative excess had clearly built up and is now being flushed out.
With month-end flows in full swing, volatility may remain elevated into the close, making staying on the sidelines the safer approach for now.