Gold price crashes 8%, silver 11% from record high as rally reverses sharply: What's behind the fall? Explained

Gold, silver price crash: A sharp selloff gripped the precious metals market, sending gold prices down 8% and silver prices down 11% from record highs. Both gold and silver retreated sharply from their all-time highs as the US dollar strengthened and investors booked gains in the precious metals.

US spot gold prices have tumbled over 8% to $5,112.39 an ounce after hitting a record peak of $5,595.46 on Thursday. At the time of writing this report on January 30, gold prices traded 3.3% lower at $5,210.20 against their last closing price.

In Thursday's overnight trade, prices had crashed by almost 6% — recording their worst single-day fall since October 21, as per a Bloomberg report.

At the same time, US spot silver prices cracked over 11% to $108.03. The white metal recouped some losses and was last trading 4% down at $111.06 an ounce.

What's behind crash in gold, silver prices?

According to analysts, the sudden fall in gold and silver prices can be attributed to multiple factors, like profit taking at higher levels, a jump in the US dollar and the selloff in the equity markets, which extended to other assets as well. Additionally, rumours the Federal Reserve could get a more hawkish chair also pressurised the precious metals.

Given the sharp run in gold and silver since the start of 2025, analysts believe the rally seems stretched and unsustainable, with investors taking profits at higher levels.

“Given the frothiness in the markets and the dominance of flows over fundamentals, it does not need much for a correction,” Julius Baer Group Ltd.’s Carsten Menke was quoted as saying by Bloomberg.

In January alone, gold prices have surged almost 25% while silver is trading higher by over 60%. These gains come on the back of a massive 65% rise in the yellow metal and 148% in the white metal in 2025.

The US dollar reversed earlier declines and climbed as much as 0.3%, adding pressure on metals. A stronger greenback typically erodes demand by raising the cost of dollar-priced commodities for overseas buyers.

Lastly, analysts said that the crash in the US stock market is fuelling a selloff in other assets, including gold, silver, industrial metals and Bitcoin.

Declines in the equities market also sparked a liquidation in other assets, including precious and industrial metals, Phil Streible, chief market strategist at Blue Line Futures, told Bloomberg. “It just seems like we’ve hit some peak euphoria,” he said.

A Mint report earlier this week had cautioned that a stock market selloff could reverse the rise in gold and silver.

"If there is a major correction in equities, investors may liquidate precious metals to move back into stocks, leading to a sharp correction in gold and silver as well. A correction in precious metals is overdue, and that money could eventually rotate back into equity markets," according to VK Vijayakumar, Chief Investment Strategist, Geojit Investments. This seems to be playing out in the market today after the US stock market was rattled by a tech rout today amid increased AI spending by the megacaps.

Tech giants dragged down the Nasdaq 100 by 1.2%. Microsoft Corp. tumbled 12% - the most since 2020 - on concern it could take a while for AI investments to pay off. S&P lost 1.13%, Dow Jones 0.42%.

Furthermore, rumours that Kevin Warsh will replace Jerome Powell as Fed Chair also dragged the yellow metal.

Warsh "is on record as saying he prefers lower rates," Damien Boey, portfolio strategist, Wilson Asset Management in Sydney, told Reuters. "But the trade-off that he makes with lower rates is that he wants the Fed to have a smaller balance sheet," he added.

Analysts advise against chasing gold, silver rally

Gold and silver prices have been on a tear amid heightened geopolitical tensions, economic turmoil amid tariff war fears and worries about the independence of the Federal Reserve.

However, WhiteOak Capital Mutual Fund believes that investors should not chase this rally now. As per the fund house, when silver tends to outperform gold with high velocity and parabolic moves, it often signals the final, speculative stage of a run, one that historically ends against investors’ best interests.

Therefore, the data suggests that for the prudent Indian investor, the most profitable move now is not to chase, but to diversify, the report added.

(With inputs from agencies)

Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions.