What’s going on with the price of gold and silver?

A positioning crisis, not a confidence crisis

Patrick Farrell, Group Chief Investment Officer

Precious metals have experienced an unusually sharp and rapid sell‑off in recent weeks – catching many investors off guard. Gold, in particular, has seen one of its steepest pullbacks in years, despite the kind of geopolitical uncertainty that would typically push prices higher. Instead of acting as a traditional safe haven, gold unwound almost all of its year‑to‑date gains, with a wave of selling sweeping across global markets. Silver also dropped meaningfully, and even copper has been caught in the downdraft.

What’s driving this dramatic move isn’t a loss of faith in gold itself, but the sheer weight of positioning. Investors across the world – from institutions to private investors – were heavily “long” on gold going into this period. With markets under pressure and liquidity at a premium, many have begun to unwind those positions. In stressed environments, investors often sell their most liquid assets first, and gold is one of the deepest, most accessible markets to raise cash quickly. That dynamic has amplified the downside move.

Meanwhile, the wider commodity complex has held up far better. Oil, in particular, is pushing into higher territory. Rising tensions in the Gulf region have only added fuel to the move. Recent developments, including Iranian threats toward key water and energy infrastructure, have heightened concerns over potential supply disruptions. That, in turn, has kept upward pressure on crude prices even as precious metals have stumbled.

This divergence between oil and metals highlights a broader shift in market focus. Traders are increasingly weighing the immediate risks posed by geopolitical escalation against the near‑term need for liquidity. As a result, commodities tied directly to supply risks like oil are rising, while those typically used as hedges like gold are being used instead as sources of cash.

For now, markets are firmly in wait‑and‑see mode. 

With tensions in the Gulf still unfolding and no clear path for de‑escalation, markets will be watched very closely. Investors appear reluctant to make bold moves until the situation becomes clearer.  What’s evident is that this sell‑off in precious metals looks less like a fundamental shift, and more like a positioning reset driven by liquidity needs and crowded trades. 

The underlying drivers of long‑term demand for gold remain intact. This period is about sentiment and stress – not structural change. Once some of the safe haven flow that has benefited the US Dollar during the Gulf conflict subsides, then we could well see precious metals pick up where they left off.

Is gold an insurance policy that never pays out?

Garry White, Chief Investment Commentator

Gold is an unusual asset class. Investors buy it to sleep better at night, trusting it as a reliable store of value that can hold up during periods of market stress, and offer reassurance when other assets are falling. 

Yet the moment a genuine crisis hits, many investors seem to do the opposite – they sell their gold and run for the exits. That rush for liquidity can send precious‑metal prices plunging, an outcome that is not supposed to happen to an asset often described as a “safe haven” and a “wealth preserver”. 

Gold has sold off sharply since the start of the current Middle East campaign, and the same thing happened during the Great Financial Crisis (GFC). So, is gold an insurance policy that never pays out?

The truth is more complicated. The global financial system is messy, interconnected and rarely behaves the way a textbook suggests. There were good reasons for gold’s recent decline, and very different – but equally rational – reasons behind its fall during the GFC. Gold is not, and cannot be, a guaranteed insurance policy against financial catastrophe that delivers in every scenario.

Take the GFC for example. Gold didn’t fall because anything was wrong with its fundamentals, but because a system‑wide liquidity crisis forced investors into indiscriminate selling. As the banking system buckled, margin calls, redemptions and forced deleveraging meant investors had to raise cash fast. In effect, they had to “sell the family silver” – including gold – simply to meet their liabilities.

The 2026 decline had a different driver. The conflict in the Middle East has dramatically raised expectations of future inflation as higher energy prices filter through the global economy. That shift has pushed interest‑rate expectations higher, undermining the appeal of non‑yielding assets such as gold. The oil‑shock‑driven inflation threat has sent bond yields rising and erased hopes of near‑term US interest rate cuts, placing downward pressure on gold despite heightened geopolitical risk.

None of this means gold has failed. It simply highlights that gold isn’t a portfolio panacea or an asset magically insulated from financial reality. It’s part of the financial system and owned by millions of investors worldwide. Its long track record of moving independently from equities and bonds makes it a powerful diversifier – a stabiliser when mainstream assets stumble. But it cannot defy gravity in the midst of a financial cataclysm. Real life is untidier than theory, and gold behaves accordingly.

A sharp pullback after an exceptional run

Rob Morgan, Spokesperson & Chief Analyst, Charles Stanley Direct

Gold had previously enjoyed an exceptional run over the past year, so a pullback isn’t surprising. What has been surprising is the speed and severity of the decline in a moment of geopolitical crisis, and that’s partly because gold had become a crowded trade. Strong central bank buying, falling interest rates, and a weaker US Dollar created a solid foundation, but a layer of speculative enthusiasm – fuelled by worries about fiat currency debasement – left the metal vulnerable once those tailwinds reversed. 

Let’s not forget that gold has, despite the size of the recent move, so far only fallen back to levels last seen at the end of 2025 – barely a quarter ago. With the dollar strengthening and interest‑rate expectations jumping higher, gold – which pays no income – suddenly looks less competitive and an unwinding of positions is to be expected.

It’s a reminder that gold isn’t really a safe haven asset – not in the short term at least. Over multiple decades it has protected purchasing power well, but in the short run it can be highly volatile, sentiment‑driven, and prone to sharp sell‑offs. In periods of acute market stress, gold can become a source of funds as investors sell what they can, not necessarily what they want to. When liquidity dries up, gold can fall alongside risk assets rather than cushioning the blow, and the recent move is a classic example.

Many investors buy gold as an inflation hedge, yet its recent heavy fall underlines how unpredictable it can be over short periods. Gold is still highly sensitive to the returns available on other assets, particularly when interest rates rise and cash and bonds look more appealing. It’s this capricious behaviour that often leaves short‑term gold buyers disappointed.

Gold can still play a useful role as a modest slice of a diversified portfolio – a ‘real’ asset with some long‑term wealth‑preservation characteristics. But investors should recognise that owning it can be a frustrating experience at times, and it should be treated as a supporting player, not the star of the show.

Among the industrial metals there is perhaps a more intuitive explanation to the size of the sell off. A hike in energy prices, alongside higher borrowing costs, means weaker business activity and lower consumption, and therefore less demand for the building blocks of the material world. It’s a potential demand shock that stands to derail the growth train from its track, scattering the carriages. 

The wider context is a superb year for metals such as copper as the resilient US economy and build out of AI infrastructure promised rising demand. With the rug somewhat pulled from under it in the short term, time will tell what the supply and demand equation looks like in the coming months and whether the market’s initial verdict is correct.