Weekly Buzz: After a historic rally, gold finds its footing

After a period of historic gains, precious metals hit a wall. Gold fell nearly 18% from its record high near US$5,600 per ounce. Silver had it worse, plunging about 30% in its steepest single-day fall since the year 1980.

What’s going on here?

Investors piled into precious metals last year, looking for safety amid geopolitical uncertainty, inflation fears, and concerns surrounding US monetary policy. The price of gold had nearly doubled over 12 months, while silver saw a roughly 260% jump over the same period.

The trigger came last Friday, when President Trump nominated Kevin Warsh as the next Federal Reserve (Fed) chair. Warsh is a former Fed governor with a reputation as an inflation hawk, and markets read his appointment as a sign that interest rates may stay higher for longer. The US dollar strengthened on the news, and made gold and silver more expensive for foreign buyers.

However, the bigger factor was just how crowded the trade had become. Speculators had built up huge positions, and in such conditions, even a modest shift in the news flow can trigger sharp moves. While these pullbacks can feel abrupt, they are a healthy feature of long-term bull markets as it allows the market to find a more stable footing.

What’s the takeaway for investors?

Let’s step back for some perspective: even after the pullback, gold is still up around 80% from a year ago – one of its strongest rallies over the past century, and silver is more than double where it was.

Short-term price swings are a normal part of any major market cycle, and they don’t change the fundamental case for investing in gold as a key diversifier. Central bank buying, ongoing concerns around fiscal policy, and persistent geopolitical risks continue to offer medium- to long-term support for gold – all themes we laid out in our 2026 outlook.

(For a portfolio with built-in diversification across asset classes, see General Investing.)

In Other News: Europe got a fresh start to the year

The Eurozone economy grew 0.3% last quarter, beating the market's expectations. Spain led the pack at 0.8%, while Germany and Italy both posted 0.3% growth. For the full year 2025, the bloc expanded 1.5%, a notable step up from 0.9% in 2024.

With confidence brightening as well, that pace could quicken. The European Commission's Economic Sentiment Indicator jumped to 99.4 in January, its highest reading since 2023. Confidence rose among manufacturers, service providers, retailers, and consumers alike.

This matters because sentiment can lead to real economic results. Hiring intentions by manufacturers, for example, also picked up, suggesting the momentum could feed through to jobs. Inflation expectations among consumers also fell sharply, which gives the European Central Bank room to keep interest rates steady.

Fiscal momentum is building in the Eurozone too. Germany, long-time champion of balanced budgets, has been loosening its purse strings. The country is now set to run annual deficits of close to 4% of GDP over the coming decade. Defense budgets across the EU are set to rise from from 1.5% of GDP in 2024 to a projected 2% by 2027.

(For more on this, read our CIO Insights: Will Europe’s fiscal spark ignite real growth?)

These articles were written in collaboration with Finimize.