Have gold and silver lost their lustre? (只提供英文版本)

Gold and silver prices have fallen steeply in recent days, unwinding a record-breaking rally propelled by a confluence of geopolitical, economic and industrial factors.

Movements like this are tough to time and may feel disorientating for some investors who have come to view precious metals, particularly gold, as safe havens during unpredictable market conditions.

But we think the reversal may be a healthy correction after a massive run-up in prices and will likely pose only limited spillover effects on other asset classes. In our view, the positive qualities of gold and silver remain intact, including their value as “real assets” and the diversification benefits they can bring to a portfolio. Despite the possibility of further volatility, we believe fundamental, medium-term drivers of precious metals will continue to support their outlook.

We think the falls (as much as -21% in gold and -41% in silver during trading from 29 January and 2 February peak to trough) were partly triggered by a drying up in liquidity as volatility increased. However, to put this correction into context: gold and silver only adjusted to mid-January levels.

The other possible trigger may have been US President Donald Trump’s nomination of Kevin Warsh as the next Chair of the US Federal Reserve. Mr Warsh is widely viewed as an orthodox choice, easing concerns that he would oversee a succession of interest rate cuts that could fan inflation. Gold tends to perform well in inflationary conditions.

Although it is hard to say the extent to which Mr Warsh’s announcement played a role in gold’s recent fall, investors tend to close hedges (like gold) on the day of such announcements.

In response to the elevated volatility, CME Group, the world’s largest operator of derivatives exchanges, increased margin requirements, making holding speculative positions less attractive and raising the prospect of sales by investors without extra liquidity to support their positions.

Gold and silver’s ascent prior to recent days had been heady. Gold’s rise of more than 70% over the past year had been defined by structural shifts we identified at the start of 2025: central bank demand, fiscal concerns, and de-dollarisation. But more traditional drivers – including a softening US dollar, a decline in real yields, and retail investor buying – further fuelled the rally. We think these shifts will continue to underpin future market dynamics.

Silver’s rise had been even more spectacular, up more than 60% during January 2026 alone. Tailwinds included structural supply shifts, significant industrial demand and the same geopolitical tensions that have supported gold.

But precious metals – along with many commodities – were “overbought” during the rally. In our view, their price reversal is a mean reversion that may create opportunities for long-term investors.

We think investors may need to get used to further volatility because of the market structure (especially for gold). While central banks have been ramping up their reserves, operating a buy-and-hold strategy, investor demand – one of the key drivers of prices – has only picked up since 2025. Given that investors are more dynamic in their asset allocation decisions than central banks, increased market fluctuations are to be expected.

For investors seeking exposure to precious metals, mining equities, in particular, offer greater leverage to metal prices and, in our view, valuations remain attractive relative to their historical averages (see box-out). Healthier cash flows have also allowed producers to increase shareholder returns through buybacks and dividends. After shifting our weighting into miners in the second half of 2025, we maintain our preference for the sector. Extreme margin improvement, in our view, is still being underestimated by the market – despite the sector’s strong recent performance.