Gold and silver prices experienced a dramatic decline on Friday, marking a sharp reversal after months of record-high rallies. Gold (GC=F) fell 6% to around $5,000 per ounce, while silver (SI=F) tumbled 14%, dropping below the $100-per-ounce threshold. The sell-off came alongside a broader stock market downturn, with major averages also lower.
The volatility in precious metals followed a period of significant gains. Over the past year, silver has more than tripled in value, outpacing gold, which has risen roughly 90%. The gold-to-silver ratio, which measures the number of ounces of silver needed to equal one ounce of gold, has dropped to 48 from a long-term average of around 65. Experts suggest that if the ratio reaches its historical low of 30, silver could surge to $170 per ounce.
Analysts attribute the recent surge in silver prices to macroeconomic factors, including a shift away from dollar-based assets, geopolitical tensions, and economic uncertainty. Investors often turn to precious metals as a hedge against inflation and market volatility. However, the recent sell-off was driven by profit-taking after record highs, a rebound in the U.S. dollar, and thinning liquidity as price swings intensified.
Goldman Sachs had set a year-end price target of $5,400 for gold, citing increased private-sector investment. However, the Federal Reserve's decision to hold interest rates steady did little to stem the dollar's decline, which had previously fueled the rally in precious metals. The World Gold Council noted concerns about declining jewelry demand in India due to record-high prices, though strong investor interest has offset some of the slowdown in central bank purchases.
The sell-off also impacted mining companies and ETFs linked to precious metals. Silver miners like Fresnillo, Endeavour Silver, and First Majestic Silver saw significant declines, while silver ETFs such as the ProShares Ultra Silver fund and the iShares Silver Trust ETF also dropped sharply. The broader precious metals market, including platinum and palladium, also experienced declines.
Despite the recent dip, gold is still on track for its best monthly performance since the 1980s. Analysts remain divided on whether the current sell-off signals a long-term peak or a temporary correction.