Advisor Mustafa Al-Manea wrote: Why did gold and silver prices drop?
In recent trading, gold and silver recorded their largest decline in decades, following a record-breaking surge that lasted from late 2025 into early 2026.
After gold nearly reached $5,625 per ounce and silver hit historic levels above $120 per ounce, gold dropped by about 9–11% to between $4,745–$4,901 per ounce, while silver fell even more sharply by roughly 30% to levels around $78–$83 per ounce.
This sparked strong reactions among investors in global markets and also raised concerns among non-investors who had turned to gold and silver as a safe haven for their savings.
“Based on inquiries from many colleagues and interested parties about the reasons behind this decline, I present in this article a brief overview of the main causes, written in simple language to make it easily understandable for everyone,” Al-Manea said.
Main Reasons for the Drop in Gold and Silver Prices:
- Profit-taking after record highs
The rise of gold and silver to record levels attracted widespread profit-taking by investors and funds, who began selling to secure their gains, increasing supply. - Market shock after news of a new Federal Reserve chair nominee
Media reported that US President Donald Trump will select Kevin Warsh to chair the Federal Reserve after Jerome Powell’s term ends in May 2026.
Markets saw this as a potential shift in interest rate policy, raising concerns about Fed direction, which triggered rapid selling of gold and silver. Although the new nominee is expected to follow Trump’s push for lower rates, markets understood Warsh’s past cautious approach to rates, his support for a strong dollar, and the complexity of rate-cut decisions at the Fed, reducing bets on gold and silver.
- Impact of a stronger US dollar and rising bond yields
Following Warsh’s nomination, the US Dollar Index rose significantly, reducing the attractiveness of dollar-denominated gold and silver. At the same time, US bond yields increased, pushing investors toward higher-yielding assets compared to non-income-generating metals like gold and silver. - Declining demand for safe-haven assets
Despite economic and geopolitical tensions that had supported metals’ rise in 2025, market sentiment recently showed a relative drop in demand for safe assets like gold and silver, as markets anticipated that tensions may have peaked. - Tech stock declines and margin requirements affecting liquidity
Recent drops in tech stocks increased margin requirements (the mandatory collateral for trades), forcing many investors to sell gold and silver to free liquidity for brokers and lenders. - Silver’s industrial sensitivity compared to gold
Unlike gold, silver is widely used in electronics, solar energy, medicine, and other industries, making it more sensitive to economic growth expectations. Combined with falling tech stocks, this led silver to drop more sharply than gold.
Conclusion
The recent fall in gold and silver was not a “normal dip” but a sharp correction after an unprecedented surge. The decline was driven by psychological and technical market factors, alongside major economic policy shifts. While markets remain unpredictable, the strength of the US dollar—up or down—remains one of the clearest influences on gold and silver prices.
About the Author
Mustafa Al-Manea is a Libyan lawyer and legal-economic expert with over 24 years of experience. He has worked with investment institutions, sovereign funds, and banks globally and in Libya. He has served as an advisor to the Governor of the Central Bank of Libya, chaired and participated in several central bank executive teams, and is a board member of the Libyan Investment Authority and Libyan Foreign Bank. He has represented Libya in World Bank and IMF meetings, led the Prime Minister’s strategic initiatives team, and lectured with the American Bar Association. He is also a member of the European Lawyers Association and the Libyan-American Council for Trade and Investment, with numerous publications and bold views on economic and financial transformation.
