By Ahmad Assiri, Research Strategist at Pepperstone
Metals underwent a sharp repricing moment on Friday, posting their steepest declines in decades, while US equities notably refrained from participating in the same panic-driven selloff. This reflects what seems to be a shift in macro sentiment following Kevin Warsh’s appointment as Powell’s successor to lead the Federal Reserve, marking a pivot in policy long-term expectations and dollar strength.
The yellow metal entered a pronounced corrective wave after registering historic peaks near the $5,600 level. The rapid retreat below $4,900, representing a loss exceeding 9% in Friday’s session alone, mirrored the reaction of Warsh, coupled with taking profits of the accumulated gains during the recent sharp ascent, particularly over the last 10 days of January. Despite this sell-off, in my view, the long term structural narrative supporting gold remains firmly intact, with central banks price-insensitive accumulation of reserves and value storage with YTD gain still up nearly 9%.
Silver, by contrast, proved the weakest link and exhibited the most violent reaction, registering Friday losses exceeding 30%. The breakdown of silver’s bullish structure, built over preceding weeks following a powerful thrust that pushed prices to $120, materialised through a broad-ranging bearish candle reflecting forced unwinding of leveraged positions. Silver’s inherently exhibits higher volatility, coupled with overcrowded long positioning and is sensitive to shifts in the macro narrative, rapidly transforming correction into liquidation.
US equities, meanwhile, presented a markedly more balanced picture relative to metals. The S&P 500’s performance map revealed modest pressure concentrated in the technology sector, with heavyweight names including Nvidia, Meta, and Microsoft retreating, reflected in the S&P 500’s 0.4% decline at week’s end, while the Nasdaq 100 posted a more notable 1.3% decline. Yet importantly, these indices appeared to be less correlated to the violent metals selloff. Relative resilience emerged across defensive and consumer sectors, with select names including Tesla and Walmart posting notable gains. This confirms that Friday’s action more closely resembled internal sector rotation than wholesale flight from risk assets.
Metals price action constituted a clear correction within an oversaturated and overleveraged metals complex, a recalibration of risk appetite, though fundamental market underpinnings remain in place with 6000 level is still a possible target for the year 2026. Looking ahead, metals are likely to sustain elevated volatility and undergo further adjustment to increased margin requirements and ongoing liquidation pressures before ultimately finding a footing with early signs suggesting that gold 4600 is a highly important key level in short term price action.