Gold and Silver: The Flow After the Crash

The selloff was a liquidity event of historic scale. Gold fell more than 11% on Friday, marking its steepest single-day decline on record. Silver plunged over 31%, its worst one-day percentage drop since 1980 and a move that pushed it into bear-market territory. This wasn't a gradual unwind but a forced liquidation triggered by a specific catalyst.

The mechanism was rapid unwinding of speculative positions. The catalyst was President Donald Trump's nomination of Kevin Warsh as the next Fed chair, which abruptly shifted expectations and strengthened the U.S. dollar. This pressured dollar-denominated gold and silver prices. The sell-off was exacerbated by the CME, which raised margin requirements, forcing traders to cover positions quickly and amplifying the downward pressure.

The immediate market reaction was a sharp rebound. On Tuesday, spot gold jumped as much as 4% and was last up over 2% at $4,771.76 per ounce. Spot silver advanced as much as 7.8% and was last trading 2.6% higher at $81.3 per ounce. Analysts view this as a positioning reset rather than a change in fundamental investor intentions.

The Rebound: Volume and Price Action

The rebound was a violent, short-term bounce. Gold plunged to a low near $4,400 before surging back to almost $4,780 in just hours, a move that captured the market's immediate reaction to the crash. Spot silver's advance was even more dramatic, jumping as much as 7.8% to trade around $83.50 per ounce before settling back. This volatility is the hallmark of a forced liquidation unwinding, not a new trend.

The immediate price action shows traders are buying the dip, but the setup remains fragile. Analysts note the risk of selling into resistance as markets reassess rate cut expectations. The rebound was fueled by a temporary easing of geopolitical tensions, which removes a key safe-haven driver. With the U.S. dollar recovering and key economic data ahead, the path for gold and silver is likely to remain choppy.

For silver, a structural bull case persists. The metal's demand from solar photovoltaics is massive, consuming 10,000 to 14,000 tonnes annually. That's up to 41% of global supply, creating a fundamental floor that supports a long-term bullish view. This industrial demand provides a counterweight to the metal's notorious short-term volatility.

The Catalysts: What to Watch Next

The primary headwind for precious metals is a resurgent U.S. dollar. The dollar index rallied to a 1-week high on Monday, gaining 0.66% as markets digested the hawkish tilt from President Trump's Fed nomination and strong economic data. This dollar strength directly pressures dollar-denominated gold and silver prices, creating a persistent short-term ceiling.

The next critical catalyst is the U.S. jobs report, due later this week. A strong print could further boost the dollar and reinforce the hawkish Fed narrative, adding fresh pressure to metals. With the dollar already rallying on hawkish comments from Atlanta Fed President Bostic and the strongest ISM manufacturing reading in over three years, the market is primed to react sharply to any new data that confirms economic resilience.

For the rebound to be sustainable, it needs to be backed by strong buying volume. The recent bounce has been volatile, and analysts warn of a risk of selling into resistance as traders reassess rate cut expectations. Without sustained volume, the rally may simply sell into resistance, leading to a return to lower volatility and a test of the crash lows.