Gold and silver prices suffered a historic sell off late last week, snapping one of the strongest rallies the precious metals market has seen in decades.

Gold tumbled more than 12 per cent in a single session, sliding back below the US$5,000 an ounce mark in its steepest daily decline since the early 1980s. Silver fared even worse, plunging over 36 per cent intraday, the sharpest fall on record, as volatility swept through the broader metals complex.

The sell off extended beyond precious metals. Copper retreated more than 3 per cent in London after hitting record highs a day earlier, while the US dollar surged, pressuring commodity linked currencies such as the Australian dollar and Swedish krona.

Market participants said the scale of the move reflected aggressive profit taking following an exceptionally rapid price surge. Gold and silver had rallied relentlessly over the past year, driven by demand for safe haven assets amid concerns around currency debasement, geopolitical risks, trade tensions and growing debate over the Federal Reserve’s independence.

That momentum accelerated further in January, pushing prices deep into overbought territory and leaving markets vulnerable to a sharp reversal. Technical indicators had already been flashing warning signs, with gold’s relative strength index reaching levels rarely seen in modern trading history.

The immediate trigger for Friday’s rout was a sharp rebound in the US dollar after reports, later confirmed, that the Trump administration had nominated Kevin Warsh as the next Federal Reserve chair. Warsh is widely viewed as more hawkish on monetary policy, a shift that supported the dollar and weighed heavily on non yielding assets such as gold and silver.

Positioning also played a major role. Precious metals had become one of the most crowded trades in global markets, with investors heavily long bullion and short the dollar. As prices stalled near key psychological levels, US$5,000 for gold and US$100 for silver, traders seized the opportunity to lock in profits, amplifying the downside move.

Derivatives markets further intensified the volatility. Large options positions expiring at key price levels forced dealers to rapidly adjust hedges as prices swung lower, accelerating selling pressure in futures and exchange traded funds. The resulting feedback loop turned what began as a pullback into a disorderly decline.

Shares of major mining companies also came under pressure, with several leading gold producers posting double digit losses in New York trading as investors reassessed valuations following the metal’s sudden drop.

Despite the dramatic correction, both metals remain significantly higher for the month, underscoring how extreme the preceding rally had become. Analysts caution that while the sell off was sparked by a shift in dollar sentiment, it was ultimately a market that had moved too far too fast.

Volatility is expected to remain elevated in the near term, with price action now driven more by positioning and technical factors than fundamentals. While it remains too early to declare an end to the broader precious metals rally, last week’s events served as a reminder that sharp moves can reverse quickly when momentum becomes stretched.

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