Gold and silver have soared to new highs at the start of 2026, only for them to plummet on Friday.
On Thursday, gold prices peaked at US$5,500 per ounce (A$7900), a significant increase over previous highs. By the end of last Friday, gold prices had fallen to US$5068 ($7,282) per ounce.
Even faster than gold, silver has been gaining value. Last week it reached more than US$120 per ounce (A$172), marking its best run in years, before falling on Friday to US$98.50.
What’s the reason for these fluctuations? What should investors be aware of regarding the current risks associated with precious metals?
Gold has reached new heights
When people are worried about the financial future, they buy gold to safeguard their savings.
Investors are looking for assets with a stable feel when the world is in turmoil. With rising political tensions, threats of trade wars, changing signals on interest rate trends, and an uncertain future, they are searching for assets which are dependable.
The early reaction of financial markets to Donald Trump’s announcement of Kevin Warsh’s appointment as chairman of the US Federal Reserve was what triggered Friday’s gold and silver crash. US central banks play a crucial role in maintaining global financial stability.
Gold is being bought by central banks all over the world at an accelerated pace. This has reinforced its reputation of a safe place to store value in times of unrest.
It’s not only the big institutions that are driving the market. Retail investors, who buy and sell smaller amounts of stock for their own benefit have also played an important role in Australia and abroad.
These individuals are increasingly buying gold and silver to hedge themselves against uncertainty. They also do it to stay ahead of the game.
Gold exchange traded funds (ETFs) are a great way to get exposure, without having to store physical gold.
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Gold prices are skyrocketing. What is the reason for this and will it last?
Silver’s price surge: What is driving it?
Silver has more than surpassed gold in the headlines since 2025. Silver had risen by more than 60 percent in the last month alone, outpacing the still impressive performance of gold, which was around 30 percent.
Silver, unlike gold, has two personalities. Silver’s demand is driven by industrial uses. Silver is essential for solar panels, electric cars (EVs), semiconductors and other clean energy technologies.
Investors are attracted by the dual appeal of gold as both a commodity in high demand and a haven for investors.
Each solar panel is made up of approximately 20 grams silver. Solar industry accounts for nearly 30% of the global silver demand.
Silver is also used in AI data centers for the semiconductors and EVs.
What’s the kicker? Silver has been in deficit on the market for 5 consecutive years. Silver is a metal that we consume more than what we mine. Most silver also comes from other metals. It’s not possible to open up more mines of silver.
Silver prices have been soaring as individual buyers pile up
CommSec is one of Australia’s top online investing platforms, with over 3 million clients.
The Bloomberg Tracking of CommSec Trades shows that retail silver ETF purchases have risen significantly in the last year.
In the last year, net purchases of gold ETFs at CommSec reached A$158,000,000. This reflects the established position of gold in portfolios.
Silver trading has exploded 1,000% more than last year, despite the fact that overall investment was a little lower at A$104million.
Retail investors traded silver in smaller amounts and more frequently. It is a classic example of momentum-chasing, where everyday investors have piled in to an asset that has seen dramatic price increases.
It is clear that silver, while still the main anchor metal for investors and traders alike, has now become a speculative option.
Retail investors who want to participate in the precious metals rally at a lower cost than gold will find it appealing because of its lower per ounce price, narrative about industrial demand, and buzz on social media.
Risks every investor should know
Data shows that Australian investors are buying when prices increase. This “fear-of-missing out” strategy comes with significant risks.
Volatility is a double-edged sword. Silver’s price had risen 269% between February 2025 and just prior to Friday’s dramatic drop. Silver’s dramatic rise had been accompanied by a 36% annualised volatility (which is a measure of how wildly varying equities prices are over 365 days). This was almost double the volatility of gold, which had been 20% over that same time period.
In practice, what does this mean? What goes up quickly can also come down fast, as we have just seen.
Buy high and be careful. Retail investors often buy near the top of the market after huge price hikes. Central banks and professional investors have been buying gold and silver at lower prices for many years.
No income, higher risk. Metals do not pay interest or dividends, unlike shares and bonds. The entire value of your investment depends on the price rising from its current level. As the last few days showed, there is a substantial potential for sharp declines.
Be modest. Financial advisors recommend that precious metals make up 5-15% in a portfolio. This guideline is more important than ever after such price volatility.
Disclaimer: The information in this article is intended to be general and not financial advice. Risk is inherent in all investments.
