UBS and JPMorgan forecast that gold prices will surpass $6,000. Following the panic selling last Friday, the precious metals market entered a phase of extreme volatility this Monday. Taking silver as an example, it experienced bidirectional swings exceeding 8% on Monday, recouping most of its intraday losses by the close, while platinum and palladium futures both rebounded nearly 10% from their session lows. There is some divergence among institutions regarding the market outlook; most believe the current decline is merely temporary, but suggest that buying the dip might still require patience. A Pullback After the Surge After plunging over 5% intraday, the COMEX February futures contract fluctuated and recovered, reclaiming the $4,700 level. This contract had plummeted 11% last Friday, marking its worst single-day performance since 1980. Last Thursday, the gold continuous contract hit an intraday high of $5,626.80 per ounce and has since fallen 17% from that peak. Institutional analysis suggests that after US President Trump nominated Wash as the next Fed Chair, the rebound in the US Dollar Index increased the pricing cost of precious metals, triggering the first wave of selling. Simultaneously, crowded trades were unwound en masse: gold and silver (particularly silver) have long attracted both professional and retail capital, forming "extremely crowded, one-sided" positions. After the parabolic price rise, a massive number of investors simultaneously exited stop-loss positions last Friday, with liquidity drying up and magnifying the decline. Some analysts still believe the bull market for precious metals will persist and expect gold prices to hit new record highs later this year. Giovanni Staunovo, UBS Commodity Analyst, stated: "We expect gold prices to climb above $6,200 per ounce later this year, setting a new historical record." JPMorgan announced on Monday that it expects gold to reach $6,300 per ounce by year-end; Deutsche Bank, citing reasons of sustained investor demand, reiterated its forecast for gold to reach $6,000 per ounce within the year. However, some institutions have warned that short-term market volatility may remain elevated, and this selling wave might not be over yet. Ole Hansen, Head of Commodity Strategy at Saxo Bank, wrote in a response that the severity of the decline was due to unwinding of ETF and options positions triggering a chain reaction of selling in the futures market. The risk of second and third waves of selling remains high, as the extremely crowded and one-sided trading positions have not substantially reversed. Citi warned that gold valuations have reached extreme territory, with global gold expenditure as a percentage of GDP soaring to 0.7%, the highest level in 55 years. If the allocation to gold reverts to the historical norm of 0.35%-0.4%, prices could face a "halving" risk. With a potential resolution to the Russia-Ukraine conflict expected in the second half of 2026, an improving US economy, and confirmation of Fed independence, a collective fade in safe-haven sentiment could remove the last pillar supporting gold prices. A summary of Wall Street views indicates that the future trajectory of the precious metals market will depend on the monetary policy path after Wash takes office, the trends of the US dollar and real interest rates, ETF fund flows, and the pace of central bank gold purchases. A 'Stress Test' for Safe-Haven Assets Based on above-ground stocks and current spot prices, the sell-off in gold and silver at one point erased $8 trillion in market value. Naeem Aslam, Chief Investment Officer at Zaye Capital Markets, wrote in a market commentary that the true revelation from this sell-off is not about price direction or valuation levels, but about liquidity, and what happens when massive amounts of capital try to exit the same "safe-haven" trade simultaneously. Gold and silver have long been heavily held hedging tools by investors, and this heavy positioning created an illusion of safety—not because their prices cannot fall, but because investors believed liquidity for these assets would always be abundant. When market volatility spikes, liquidity dries up first in the most crowded positions. The selling intensifies not necessarily because investor conviction collapses, but because risk limits, margin requirements, and volatility control rules force investors to reduce their exposure. Silver sits at the intersection of hedging, speculation, and leveraged trading: its market size is smaller, positioning is more aggressive, and it structurally exhibits higher volatility. When market liquidity tightens, silver doesn't just follow gold lower; it magnifies the decline exponentially. It could be said that gold's movement exposed stress at the positioning level, while silver's movement fully exposed the liquidity stress in the market. Aslam believes that after such sharp plunges, market discussion quickly turns to "whether this is a buying opportunity." However, the more valuable question is never "what to buy," but "what type of buyer are you?" Otherwise, investors risk acting blindly amidst market turmoil rather than seizing genuine opportunities. Price-sensitive buyers—typically long-term holders or physical asset holders—can consider trades from a value and asset allocation perspective. In contrast, liquidity-sensitive holders—investors positioned via futures, options, or highly tradeable instruments—have their actions dictated by volatility and risk control rules, not necessarily their own conviction. He wrote that the deeper, perhaps difficult yet necessary, insight from this precious metals crash is that many investment portfolios are diversified by asset class but not by liquidity characteristics. When market stress arrives, seemingly different hedging tools can ultimately funnel investors toward the same exit. This is why assets intended as capital safe havens can see trillions in market value evaporate overnight. This does not negate the value of gold and silver as long-term hedges, but it challenges the assumption that "holding quality assets equals having safety": during market stress, it is liquidity, not fundamental logic, that determines asset prices. Aslam expects the true "all-clear signal" for the market will not be a price rebound, but a decline in volatility. Otherwise, market liquidity will remain fragile. Physical buying might slow the pace of decline but cannot prevent sharp swings triggered by forced position adjustments. This precious metals sell-off does not represent a market rejection of their safe-haven attributes, but rather a stress test for the market—demonstrating that when everyone relies on the same asset for safety simultaneously, even so-called safe assets can become turbulent.
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