The gold and silver markets have experienced a sharp reversal, ending the speculative euphoria of recent months. Silver lost approximately 36%, while gold fell by around 12%. Such a significant movement confirms that prices have strayed significantly from fundamentals, as reflected in the long term by, for example, the London Bullion Market.
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Speculation took control of the market
The decline in precious metals was not accidental. For a long time, the market was driven primarily by speculative capital, especially through derivative instruments. Vertical price structures and extreme trading volumes created an environment that is inherently unstable and prone to sharp sell-offs.
The price of silver rose by approximately 300% in about 13 months. Such growth does not occur naturally, but as a result of massive excess buying orders in a relatively narrow market. We have seen similar situations historically, for example in 2010 to 2011 or in 2020, always shortly before significant price peaks were reached.
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Return to equilibrium and signals from other markets
Even strong fundamentals do not mean that it is reasonable to buy at any price. After extreme growth, regression to normal is a natural process in which the market seeks a new fair price corresponding to economic reality. This process is often painful, but necessary in the long run.
An interesting addition to the picture is the development of gold against the S&P 500 stock index and the development of Bitcoin, whose technical structure confirms the ongoing correction. These signals point more to a realignment of capital than to an immediate systemic crisis.
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