After a roller-coaster start to 2026, both gold and silver prices plummeted in the last couple of trading sessions.
But, prices have started to rise again on Tuesday as gold surged more than 6%, while silver nearly 14% from Monday’s close. Experts believe that prices are likely to stabilise and even recover further, especially for gold.
Gold prices recently plummeted from a near-record high of almost $5,600 per ounce, experiencing a significant drop to as low as $4,400 within a mere two days.
The current price is still $600 below the level observed before this initial sharp decline.
Hawkish Fed nomination drives sharp sell-off
Silver saw an even sharper decline in price, experiencing its largest-ever daily drop on Friday. Prices had fallen to below $75 per ounce on COMEX from an unprecedented record high of $120 per ounce.
The nomination of Kevin Warsh, known for his hawkish stance on the Fed’s Open Market Committee, as the next Fed chair was the catalyst for this action.
Warsh, already a favorite for the position, had his nomination confirm expectations, yet the decision likely allayed concerns about excessive monetary easing stemming from the central bank’s perceived politicization.
On Tuesday, buyers returned to lift the precious metals market as investment demand and central buying boosted sentiments.
On Tuesday, gold was set for its largest single-day increase since 2008.
Investment demand and major bank price forecasts
Major banks have issued high gold price forecasts for the year-end. UBS and JP Morgan project gold to reach $6,200–$6,300, while Deutsche Bank anticipates the metal will hit $6,000 this year.
For 2026, Citi has held its base-case forecast, predicting an average price of $5,000 in the first quarter.
“Given the rapid rally in both precious metals, especially in the first weeks of the year, a correction rather seemed appropriate,” Thu Lan Nguyen, head of FX and commodities research at Commerzbank AG, said in a report.
Market participants were obviously just waiting for an opportunity to take profits. After all, the price of gold had almost doubled since the beginning of last year, while the price of silver had almost quadrupled.
According to Commerzbank, if geopolitical risks intensify again such as tensions between the US and Iran, the prices of gold and silver are likely to advance again sharply.
Why correction was “appropriate”?
“Could that mean the downside correction is over? Who knows. But traders should not assume that it won’t continue to be volatile,” said David Morrison, senior market analyst at Trade Nation.
The volcano may have blown, but prepare for possible aftershocks.
Silver has become a more popular purchase as a less expensive substitute for gold following the recent downturn.
Nevertheless, Commerzbank’s Nguyen does not anticipate an immediate recurrence of the substantial price increases observed earlier this year.
The recent price slump has likely heightened investors’ awareness of the associated risks and deterred many from further investment.
“The fact that gold and silver are institutionally independent also means that, unlike fiat currencies, no central bank will step in if there is a market fallout,” Nguyen said.
However, this does not necessarily mean that gold and silver prices would plummet endlessly.
Major price declines have consistently been treated by investors as buying opportunities in recent months, frequently leading to quick price recoveries.
Gold is expected to be a key example of this trend, given its established role as a significant reserve asset for numerous central banks.
The recent drop in gold prices offers an opportunity for central banks that were previously deferring their planned gold purchases due to the high cost.
On the other hand, silver’s price increase since the start of the year was 70% till last week’s slump.
The price of silver had more than doubled since October, when it first surpassed $50, and had quadrupled since the start of 2025.
“This was clearly an exaggeration, and a correction was therefore overdue, even if its magnitude came as a surprise.” Carsten Fritsch, commodity analyst at Commerzbank said.
Volatility and medium-term outlook
Following a price slump, the gold/silver ratio climbed back to 60. This increase occurred after the ratio had dropped to 45 last week, a level not seen since September 2011.
“In the short term, silver is likely to remain highly volatile, as some investors may still be forced to sell due to higher margin requirements on futures contracts,” Fritsch said.
On the other hand, the sharp price slide could spark new buying interest from other investors.
According to Commerzbank, in the medium term, the German bank expected gold and silver to stabilize or even recover somewhat from their recent decline.
“In addition to the ongoing political uncertainty, this is supported above all by our expectation of stronger interest rate cuts by the US Federal Reserve than are currently priced in by the market,” Nguyen noted.
Gold prices on COMEX were 6.5% higher at $4,951.25 per ounce on Monday, while the silver contract surged 14% to $87.770 per ounce.
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