• Spot gold prices fell below $4,850 per ounce, marking a 2.80% decline, while silver dropped 5.00% to $72.50 per ounce in a sharp correction.
  • The selloff was exacerbated by low liquidity from Lunar New Year closures in Asia and the U.S. Presidents' Day holiday, alongside a stronger U.S. dollar and shifting market expectations.
  • Analysts attribute the plunge to mechanical factors like margin calls and overcrowded positions, with trillions in market value erased amid ongoing uncertainty over Federal Reserve policy.

Precious metals markets experienced a rapid and severe selloff earlier in the week, with silver plunging nearly 10% in just 30 minutes to below $76 per ounce and gold shedding 3.5% to under $5,000, before staging partial recoveries. By recent trading, spot silver hit $75.05 after an intraday drop exceeding 5%, while gold declined 0.7% to $5,007.70, according to market data. The moves, which erased trillions in market value, were driven more by mechanical factors like margin calls and overcrowded positions than fundamental shifts, people familiar with the matter said.

A stronger U.S. dollar, with the index up 0.3%, made metals costlier for foreign buyers, amplifying pressure in a market already thinned by holiday closures. Weak liquidity from Lunar New Year holidays in Asia (Feb 15-23) and the U.S. Presidents' Day holiday contributed to the volatility, with trading volumes notably thin. Strong U.S. job data and growing uncertainty over Federal Reserve rate cuts have reduced the appeal of non-yielding assets like gold and silver, as investors await clearer signals from the Fed on inflation and monetary policy. Efforts to reach Fed officials for comment were not immediately successful.

Kevin Warsh's nomination as the next Fed chair on Jan 30 lowered perceived policy risk, triggering reversals in precious metals and boosting confidence in the U.S. dollar, according to analysts. Reports of Russia pivoting back to USD settlements have rattled bets on de-dollarization, adding to the pressure on safe-haven assets. Reduced geopolitical tensions, such as U.S. indirect involvement in Iran nuclear talks, have further curbed demand for metals as a hedge. "This correction reflects a recalibration of expectations rather than a fundamental breakdown," one market strategist noted, speaking on condition of anonymity.

Retail investors and speculators faced significant losses from leveraged positions, sparking debates over whether manipulation or natural market forces were at play. Mining companies and public firms with exposure to precious metals saw share price pressure, while industrial users in sectors like electronics and solar may benefit from lower input costs in the short term. No widespread public reactions have been noted, but analysts highlight the volatility as a cautionary tale for over-leveraged traders. Silver had risen 130% in 2025 driven by industrial demand, but is now correcting from overbought levels, according to market reports.

Looking ahead, silver risks dipping below $75 if dollar strength persists and rate cuts are delayed, with support likely near current levels amid low volumes. In the long term, a potential recovery could emerge if the Fed cuts rates, the dollar weakens, or industrial and global demand rises. Analysts like Suki Cooper of Standard Chartered view such corrections as healthy for maintaining longer-term uptrends. J.P. Morgan has noted persistent supply constraints that could underpin prices over time. Platinum fell 1.5% to $2,010.72 and palladium dropped 1.9% to $1,692, confirming sector-wide pressure, with broader stock declines on Feb 12 also influencing metals markets. Similar crashes have occurred in thin markets before, with $2.5 trillion wiped in 30 minutes in a recent episode, underscoring the fragility of liquidity conditions.