By Daniela Hathorn, senior market analyst at Capital.com
Market volatility remains elevated across asset classes, but in recent weeks precious metals have emerged as the focal point for both price action and investor attention. Gold and silver have not only dominated headlines, but also trading activity, with silver in particular climbing rapidly up the ranks of most-traded assets following its sharp surge earlier this year.
While volatility is visible across equities, FX, crypto and commodities, the narrative of the past ten days has largely begun and ended with the precious metals complex. What initially appeared to be a straightforward bullish trend has evolved into a period of sharp repricing, forcing markets to confront how speculative positioning had become.
From Momentum to Recalibration in Gold and Silver
In the run-up to the recent selloff, gold — typically the more defensive of the two metals — began to display increasingly speculative behaviour. Gold prices rallied for seven consecutive sessions with little resistance, while silver traded with slightly more restraint, showing early signs of seller pressure near the highs. This divergence was unusual, given silver’s reputation as the more speculative metal, and proved to be an early warning sign.
Gold (XAU/USD) and Silver (XAG/USD) daily chart
Past performance is not a reliable indicator of future results
As momentum accelerated, both metals became increasingly difficult to trade from a risk-management perspective. Valuations grew stretched, volatility increased, and entry points became less attractive. At the same time, portfolio rebalancing at the start of the year played a critical role, with strong prior gains leaving many portfolios overweight precious metals. As prices reversed, forced liquidation and margin pressures spilled into other areas of the market, amplifying the move.
The result was a sharp and disorderly correction that broke early last week, with negative momentum briefly spilling into equities, crypto and FX as correlations rose.
A Market Driven by Positioning, Not Fundamentals
Despite the violence of the move, the longer-term fundamentals for gold and silver remain largely intact. Precious metals continue to appeal as stores of value and hedges against political, fiscal and institutional uncertainty. What changed was not the macro backdrop, but positioning, liquidity and leverage.
The current phase appears to be one of technical recalibration rather than fundamental breakdown. Gold and silver have retraced to levels broadly consistent with those seen at the end of 2025, effectively resetting overstretched momentum. Recent rebounds — with silver rising sharply and gold stabilising near key levels — suggest investors are still interested, but with greater caution.
That said, volatility is unlikely to disappear quickly. The price action now resembles a “fishtail” pattern, with swings of diminishing amplitude as the market digests excess leverage. Sideways consolidation and two-way trade may persist before any renewed attempt to test record highs.
Silver’s Speculative Edge Remains a Source of Instability
Silver’s behaviour continues to highlight its dual nature. While longer-term industrial demand tied to electrification and technology remains supportive, short-term price action has been largely divorced from supply and demand fundamentals. Daily moves of three to five percent underscore that the market is still driven more by flows, momentum strategies and speculative participation than by fundamental repricing.
This does not invalidate the long-term silver story, but it does suggest that near-term bullish calls are technical rather than fundamental in nature.
Broader Market Ripples: FX, Equities and the Dollar
The turbulence in precious metals has coincided with notable moves elsewhere. The US dollar, which had been pressured by political uncertainty and “sell America” narratives earlier in the year, found support as volatility rose and risk positions were reduced. However, that rebound has proven fragile, with the dollar slipping again as broader market nerves ease.
US dollar index (DXY) daily chart
Past performance is not a reliable indicator of future results.
In equities, particularly in the tech sector, earnings season has become a catalyst for rotation rather than outright risk aversion. While headline earnings have generally been strong, investors are increasingly focused on capital expenditure, especially related to AI. Major technology firms have signalled sharply higher spending, prompting concerns about diminishing returns and balance-sheet strain. As a result, tech stocks have underperformed even as broader equity indices show signs of rotation rather than collapse.
Asia, FX and Intervention Risk:
In FX markets, the Japanese yen remains a critical point of focus. Persistent policy divergence between the Bank of Japan and other central banks continues to pressure the currency, keeping markets on high alert for intervention. While verbal warnings have slowed depreciation at times, the underlying fundamentals continue to favour a weaker yen unless policy settings shift meaningfully.
What Markets Are Watching Next:
Attention now turns back to the macro calendar, particularly US labour market and inflation data. With Jerome Powell nearing the end of his term and Kevin Warsh widely expected to take over as Fed Chair, markets are increasingly sensitive to how data influences rate expectations. While leadership changes may affect tone and communication, the data remains the ultimate driver.
Employment figures and inflation releases will be critical in determining whether markets lean back into expectations of easing — a scenario that could support equities and precious metals — or whether sticky inflation forces continued restraint.
Markets are navigating a period of heightened volatility driven by positioning, leverage and uncertainty rather than a collapse in fundamentals. Precious metals remain central to the narrative, but the broader picture suggests rotation, recalibration and consolidation rather than systemic stress. Until volatility subsides and correlations normalise, caution and selectivity are likely to remain the dominant themes.
