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A precious-metals reality check
06/02/2026
The latest sell off was a dramatic reminder that precious metals can move in bursts. Inflation adjusted prices are still at levels rarely seen in modern history.
Gold can move fast - and then it can move faster. Our Chart of the Week plots inflation‑adjusted prices for gold and silver over the long run. The point is to remind readers under the age of 50 what these markets have historically been like during certain episodes. Every few decades, there have been repeated surges, sharp pullbacks and – especially for silver – big overshoots, followed by long periods of relative tranquility. And, unless purchases and sales were well timed, the wished-for protection against inflation, as measured by U.S. consumer prices, has been patchy.
The run‑up into late January had the hallmarks of a crowded trade: rapid gains, momentum-chasing and a growing role for exchange‑traded funds (ETF). According to The Economist[1], ETF holdings in gold surged during Covid, fell back for years and have been rising again since 2024 – still below the 2020 peak, but enough to matter at the margin.
Then came the catalyst. After gold nearly touched $5,600, selling set in and sent it $1,000 lower before it seemed to find a floor. The nomination of Kevin Warsh as Chair of the U.S. Federal Reserve (Fed) was widely read as a sign of steadier hands at the Fed, and that mattered because parts of the rally had come to reflect distrust in the U.S. dollar. When the mood shifted, the exit became crowded. Other plausible culprits include exchanges in the U.S. and China raising margin requirements for precious-metals trading and a wave of seasonal selling ahead of the lunar new year. Leverage and thin liquidity did the rest.
Silver’s larger moves fit its historical patterns, admittedly in unusually amplified fashion. It is both an industrial input and a precious metal, so it tends to swing harder, not least as some of the industrial silver demand is quite price sensitive. For investors, the key takeaway of recent events is that large drawdowns are part of the package when it comes to precious metals. Once nerves have calmed, it is also worth keeping in mind that central banks have been meaningful gold buyers since 2022, and it is hard to see one violent week reversing that preference overnight. But none of this is a particularly good argument for stand-alone investments in assets that produce no income. As Johannes Müller, Head of Research at DWS argues, “In our view, gold is a tail hedge. It makes most sense as part of a well‑diversified portfolio.”
Gold and silver prices in the long run after adjusting for inflation
Sources: Bloomberg Finance L.P., DWS Investment GmbH as of 2/4/26
* Bloomberg Composite Gold Inflation Adjusted Spot Price
** Bloomberg Composite Silver Inflation Adjusted Spot Price
This information is subject to change at any time, based upon economic, market and other considerations and should not be construed as a recommendation Past performance is not indicative of future returns. Forecasts are based on assumptions, estimates, opinions and hypothetical models that may prove to be incorrect. Alternative investments may be speculative and involve significant risks including illiquidity, heightened potential for loss and lack of transparency. Alternatives are not suitable for all clients.