Precious Metals Market Sudden Change: Bull Market Logic Reconfiguration and Key Turning Points
Introduction
Recently, the precious metals market has experienced a violent shock. International gold prices plunged after hitting historical highs, and silver prices collapsed by more than 20% in just a few days, triggering intense volatility in global financial markets. Due to the large size and numerous investors in the precious metals market, the crash led to a sharp rise in risk aversion in international financial markets, and panic also had a significant impact on stock markets. Is this sudden adjustment a normal correction in the middle of a bull market, or does it mean that the long-lasting precious metals bull market is about to end? Reviewing the starting point and evolution path of the current precious metals bull market and examining the profound changes in multiple logics may help us grasp key turning points.
1. Review of the Precious Metals Bull Market and Driving Logic
1.1 Gold Bull Market: A Long Journey Starting in December 2015
Looking back at the current precious metals bull market, the starting point of the gold bull market can be traced back to December 2015. At that time, the Fed had just started its rate hike cycle, and the market generally expected the dollar to strengthen. Gold prices once fell to a cyclical low of $1,046/oz. However, this low turned out to be the starting point of the bull market. Since then, gold prices have gradually climbed, experiencing major events such as the UK Brexit referendum in 2016, the Sino-US trade friction in 2018, and the COVID-19 pandemic in 2020. Gold prices broke through $2,000/oz in August 2020, hitting a record high. Although there was some correction afterward, they have stood above $2,000 since 2024 and have repeatedly broken records in 2025.
1.2 Silver Bull Market: Emerging Suddenly in March 2020
Unlike gold, the silver bull market started significantly later. Silver prices fell to an extremely low of $11.6/oz during the pandemic in March 2020, and then driven by loose monetary policies, industrial demand recovery, and speculative fund inflows, they started a magnificent rally. Silver not only has the safe-haven attribute of precious metals but also has industrial metal attributes. Driven by demand from emerging industries such as photovoltaics and new energy vehicles, its price elasticity is much greater than gold. From 2020 to 2025, the maximum increase in silver prices exceeded 300%, making it one of the most dazzling varieties in the commodity market.
1.3 Core Drivers of the Bull Market
The formation of the current precious metals bull market is not accidental but the result of the resonance of multiple macro logics. First, the unprecedented quantitative easing policies of global central banks led to overflowing liquidity, with real interest rates continuing to fall and even entering negative territory, greatly enhancing the holding value of gold. Second, frequent geopolitical risks - the Russia-Ukraine conflict, tensions in the Middle East, intensified great power competition - pushed safe-haven demand into the precious metals market. Third, global central banks began to massively increase gold reserves from 2022, with central banks of emerging market economies such as China, India, and Turkey becoming major buyers, providing solid physical demand support for gold prices. Fourth, the dollar credit system faces challenges; some countries seek "de-dollarization," and gold's attribute as a supra-sovereign currency has regained attention.
2. Multiple Factors Behind the Crash: Bull Market Logic Challenged
2.1 Monetary Policy Expectation Shift
The most direct trigger for this crash is the sharp shift in market expectations for major central bank monetary policies. After the Fed raised interest rates multiple times, inflation data still showed resilience, and the market began to worry about a "higher for longer" interest rate environment. Once real interest rates rise, the opportunity cost of holding gold will increase significantly, directly shaking the underlying logic of the precious metals bull market. The European Central Bank and the Bank of England also maintain hawkish stances, and global liquidity tightening expectations have suddenly heated up.
2.2 Recession Concerns and Liquidity Crisis
The crash highlights the fragility of the market. During the sharp decline in precious metal prices, some highly leveraged long positions were forced to liquidate, triggering a chain reaction. More worrisome is that panic spread to the stock market, with major indices falling sharply. This phenomenon of "selling all assets" suggests that the market may be shifting from "safe-haven mode" to "liquidity crisis mode." When investors need to sell gold to raise cash to meet margin calls, gold's "safe-haven asset" attribute temporarily fails, and it becomes a target for selling instead.
2.3 Subtle Changes in Supply-Demand Pattern
Although global central bank gold purchases remain high, marginal increases may slow. Since 2025, some central banks have started to reduce gold reserves in exchange for foreign exchange, or have paused purchases due to high gold prices. Meanwhile, mine gold supply has grown steadily, and scrap gold recycling has also increased under the stimulus of high gold prices. For silver, industrial demand faces pressure from slowing global economic growth, photovoltaic installed capacity growth may fall short of expectations, and inventory levels are at a relatively high level. The subtle changes in supply-demand fundamentals have weakened the upward momentum for precious metal prices.
2.4 Technical Overbought and Market Sentiment Reversal
From a technical perspective, gold and silver were severely overbought before the crash. The deviation of the gold price from the 200-day moving average exceeded 30%, and silver's Relative Strength Index (RSI) had been above 70 for a long time. Such technical foam easily leads to stampede-style declines when triggers appear. Market sentiment has quickly shifted from extreme euphoria to extreme pessimism, with speculative net long positions falling sharply.
3. Key Turning Points: Changes in Multiple Logics and Future Outlook
3.1 Core Position of Dollar and Interest Rates
The future direction of the precious metals market largely depends on the Fed's monetary policy path. If inflation remains stubborn and interest rates stay high, gold will face continued pressure. But if the economy shows signs of recession and the Fed is forced to cut rates, precious metals will regain upward momentum. It should be noted that the current market's excessive bet on rate cuts may face a correction, and volatility in precious metals will remain high.
3.2 Long-Term Support from Central Bank Gold Purchases
Despite short-term fluctuations, the trend of global central banks increasing gold holdings is unlikely to reverse in the short term. Geopolitical risks, de-dollarization, and the need for diversified reserves will continue to support central bank allocation to gold. The People's Bank of China has increased gold holdings for 18 consecutive months, and Russia, Turkey, and other countries continue to buy. This structural buying will form a long-term bottom support for gold prices.
3.3 Silver's Unique Investment Logic
Silver's high elasticity is both an opportunity and a risk. In a bull market, silver gains typically exceed gold; but in a bear market, declines are also more severe. Currently, silver prices have fallen back to around $25/oz. There is a game between the downside risk of industrial demand and the long-term demand from green energy transition. Investors need to closely monitor global manufacturing PMI data and changes in end-demand for photovoltaics, new energy vehicles, etc.
3.4 Investor Response Strategy
For ordinary investors, it is not appropriate to blindly buy the dip at the current juncture, nor to completely give up precious metals allocation. It is recommended to adopt the following strategies: first, control positions and reduce leverage; second, buy in batches at low levels to avoid heavy positions at once; third, focus on a balanced allocation between gold ETFs and physical gold; fourth, closely monitor central bank policy meeting minutes, inflation data, and geopolitical events. Historical experience shows that corrections in precious metals bull markets are often violent and rapid, but the long-term trend remains upward.
Conclusion
This crash of the precious metals market is the result of multiple logic changes - monetary policy shifts, liquidity tightening, marginal supply-demand changes, and technical overbought conditions working together to end the previous one-sided upward trend. However, this does not mean the complete end of the precious metals bull market. Long-term factors such as deep contradictions in the global monetary credit system, geopolitical risks, and central bank gold purchase trends still exist. The gold bull market started in December 2015, and the silver bull market started in March 2020. Their foundations have been impacted but not disintegrated. The current market is in a key transition period, and investors need to remain rational, carefully assess risks and opportunities, and find a new balance amid turbulence.
In the future, precious metal prices will not simply replicate historical trends but will be re-priced under new macro logic. For investors who can go through cycles and grasp key turning points, a crash may be the window to position for the next stage.
