Gold’s Sharpest Fall in Decades Ends Rally

Precious metals' strong rally comes to a halt.

Gold prices retreated sharply after a powerful start to the year, as changing policy expectations and tighter trading conditions triggered a wave of position unwinding. The pullback followed renewed debate over U.S. monetary policy leadership after Donald Trump named Kevin Warsh as his choice to lead the Federal Reserve.

Record Highs and Sudden Reversals

Precious metals began January on a strong footing. Prices pushed to fresh record highs as central banks continued adding bullion to their reserves, while demand for safe assets grew on financial and political uncertainty. Gold and silver had already delivered a standout performance in 2025, with gold posting its strongest annual gain since 1979.

That momentum carried into early 2026. Gold climbed above $5,500 per ounce late in January, while silver surged to an all-time high beyond $120. Concerns tied to U.S. tariff policy and stretched valuations in artificial intelligence-related equities kept demand elevated across hard assets.

Fed Leadership Adding to Volatility

The tone shifted suddenly after Trump’s nomination of Warsh. Although Warsh is not firmly opposed to rate cuts, his perceived stance is less dovish than markets had priced in. That reassessment supported the dollar and weighed heavily on non-yielding assets. On Friday, precious metals sold off aggressively, with spot gold recording its steepest one-day decline since 1983, falling more than 9%, while silver plunged 27%.

Margins Tighten, Pressure Builds

Selling pressure intensified after CME Group raised margin requirements for precious metals futures. Higher margins increase the capital required to maintain positions, often accelerating forced reductions. This dynamic extended the weakness that first appeared after Black Friday and pushed spot gold back toward the $4,600 area.

Technical Levels in Focus

Key price zones are now shaping the near-term outlook:

Below $4,600: downside momentum strengthens and pressure stays elevated.
Break of $4,600: opens the way toward $4,275.
Further weakness: brings $3,885 support into focus.

The structure suggests risks remain tilted to the downside, with any rebounds likely to stay corrective rather than signaling a broader shift in trend.

Longer-Term Factors Still Matter

Wall Street analysts continue to expect the Fed to deliver at least two rate cuts in 2026, a backdrop that traditionally supports gold when borrowing costs fall. Structural factors also remain relevant: only about 216,265 tonnes of gold have ever been mined, according to the World Gold Council, reinforcing its scarcity appeal.

Still, gold’s recent slide proves how quickly sentiment can reverse. When risk concerns ease or gains appear stretched, prices can correct just as sharply as they rise.

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