Market move and immediate context
Gold and silver extended a steep decline on Monday, building on the sharp reversal seen late last week as a firmer U.S. dollar, heightened margin requirements and investor profit-taking drained momentum from a rally that had taken both metals to fresh record levels.
Spot gold fell as low as $4,402 in early trading before recovering some ground and was last down 3.7% at $4,687.52. The metal had plunged nearly 10% on Friday, a move that carried prices below the $5,000 mark.
Silver also remained under heavy pressure following its roughly 30% collapse late last week. The metal dropped more than 12% at one point during Monday’s session before stabilizing near $79.2 an ounce.
Exchange response and market mechanics
In response to the volatility, the CME Group tightened trading conditions on COMEX. The exchange raised margins on gold futures to 8% from 6% and increased margins on silver futures to 15% from 11%, a move designed to limit spillover from rapid price moves by forcing larger capital cushions for leveraged positions.
Market participants linked the rapid unwind to a sudden repricing of interest rate expectations and a rebound in the dollar that followed President Donald Trump’s nomination of Kevin Warsh as the next Federal Reserve chair. That sequence prompted a broader unwind of crowded positions across the precious metals complex.
Analysts’ interpretations
Deutsche Bank analyst Michael Hsueh characterized the magnitude of the drop as driven more by positioning stress than by a change in underlying fundamentals. As he put it, "The positioning adjustment and price movement in precious far outstripped the significance of its catalysts." Hsueh added that "the conditions do not appear primed for a sustained reversal in gold prices," noting that investors’ core reasons for holding gold "has not likely changed for the worse as of yet." Deutsche Bank reiterated a $6,000 an ounce target for gold.
Barclays strategists led by Emmanuel Cau described the move as a near-term reset after an overheated run-up. The team said that "a pull back and positioning reset after its sharp ascent look warranted," stressing that gold appeared "technically stretched" and over-positioned, while noting they do not view the metal as a bubble. Barclays expects the underlying bid for the asset to remain, albeit at lower levels, supported by central bank demand, inflation dynamics and policy uncertainty.
UBS offered a similar interpretation, calling the slump "volatility within a continuing structural uptrend" rather than the end of the bull market in precious metals. Strategists led by Wayne Gordon argued that bull markets typically only conclude when central banks fully restore policy credibility, a condition they do not see as met. UBS forecast a near-term consolidation in the $4,500 to $4,800 range before a resumption of gains toward its mid-year gold forecast of $6,200 an ounce.
Outlook and implications
While market technicals and elevated margins have amplified recent downward moves, the major banks quoted view the episode largely as a correction and rebalancing of positions rather than a decisive turn in the metals’ long-term trajectory. Analysts point to ongoing central bank demand, inflation dynamics and policy uncertainty as elements that continue to support precious metals at lower levels. Near-term consolidation in specific price bands was forecast by some strategists before potential re-acceleration toward previously announced targets.