After shining brightly and breaking all-time records, gold and silver began to lose their luster. At least for a moment. What seemed like an unstoppable run turned into a sharp correction that took many investors by surprise. And you know what? The fall wasn't accidental. Behind the movement are political decisions, economic expectations, and market dynamics that are worth understanding. This is why we always tell you that you should know the risks before investing in any asset. Over the past week, both precious metals had reached unprecedented levels. Gold surpassed $5,500 per ounce, while silver followed suit. However, Friday marked a turning point. Gold fell below $4,500 in overnight trading. “It was gold's biggest daily drop since 2013,” Michael Brown, senior strategist at Pepperstone, told CBS MoneyWatch. Silver took an even more severe hit, plummeting more than 31% in a single day. Although prices showed a slight rebound on Monday, settling around $4,779 for gold and $81 for silver, the damage had already been done. Many are wondering what triggered such an abrupt adjustment.

What explains the sharp rise and fall of gold and silver?

Over the last year, precious metals benefited from fear. Global geopolitical uncertainty, rising government debt, and doubts about economic stability pushed investors toward assets considered safe havens. But that same enthusiasm ended up amplifying the failure.

One of the key catalysts was President Donald Trump's announcement of his nomination of Kevin Warsh as a possible successor to Jerome Powell at the helm of the Federal Reserve. Although Warsh has advocated for lower interest rates in the past, he is seen as a hawk on inflation. With consumer prices still above the Fed's 2% target, Analysts believe his stance could slow aggressive rate cuts. This scenario typically affects gold. When rates rise or are expected to remain high, the metal loses appeal because it doesn't generate interest. At such times, many investors opt for stocks or other assets with higher potential returns. Adding to this was the strengthening of the dollar. The US currency had hit four-year lows but rebounded after Warsh's announcement.Historically, gold and the dollar move in opposite directions. "The dollar's rebound acted as a trigger for rapid risk abatement and a sharp sell-off," explained Gregory Shearer, executive director of global commodities research at JP Morgan. Another key factor was the excessive use of leverage. Many investors had borrowed to take advantage of the gold rally. When prices began to fall, brokerage firms raised margin requirements. In this scenario, "many chose, or were forced, to sell. This process pushes prices down regardless of the fundamentals," commented Nigel Green, CEO of deVere Group. The outlook is now divided: some believe that once the forced selling ends, there could be a technical rebound. JPMorgan even raised its year-end projection for gold to $6,300. Others, like Neil Shearing of Oxford Economics, warn that the market is showing signs of euphoria and fear of missing out, inflating a potential bubble. For investors, especially first-timers, who want to explore this model, it's important to know that precious metals remain sensitive to monetary policy, the dollar, and the emotional behavior of the market. Although they are considered a safe-haven asset when the national economy and geopolitics are turbulent, these same factors can make them temporarily more volatile, leaving you in a downward spiral if you jump on the bandwagon later than others.

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