On December 29, 2025, the international gold and silver market experienced rare and violent fluctuations. London spot gold quickly fell back from the intraday high of $4,550 to below $4,470, a drop of 1.54%; silver's performance was even more extreme, once reaching as high as $83.94 and then plummeting to $74.50, with an intraday fluctuation of more than 11 percentage points, and finally closed down 8.71%. This "roller coaster" market is not driven by a single factor, but is the result of the resonance of multiple mechanisms including the ebbing of geopolitical sentiment, revision of monetary policy expectations, technical liquidation and market structural fragility.

Geopolitical easing triggers flight of safe-haven funds

Gold and silver continued last Friday's gains in early trading, mainly supported by year-end safe-haven buying and central bank gold purchases. Silver also hit a new record high due to expected industrial demand for photovoltaics, new energy and other industries. However, market sentiment quickly reversed in the afternoon. The core trigger was the unexpected progress of the Russia-Ukraine peace talks, which significantly reduced the short-term geo-risk premium.

Because silver has both stronger speculative properties and lower liquidity, it is much more sensitive to changes in risk aversion than gold. Once risk appetite rebounds, the early influx of safe-haven funds will quickly withdraw, forming concentrated selling pressure. Historical data shows that during the phase of easing geopolitical events, silver's retracement range is 2-3 times that of gold on average. This market trend has once again verified this rule.

Cooling Fed policy expectations weigh on non-interest-bearing assets

In addition to geopolitical factors, marginal changes in monetary policy expectations also constitute a key suppressive force. Recently, many Federal Reserve officials have made public statements, emphasizing that inflation is still sticky and that the path of interest rate cuts in 2026 may be more cautious than market expectations. This signal drove the U.S. dollar index to strengthen, and the U.S. 10-year real interest rate rebounded slightly, directly weakening the relative attractiveness of non-interest-bearing assets such as gold and silver.

It is worth noting that the market has previously priced the interest rate cut in 2026 to a relatively high level. Once the policy narrative is fine-tuned, expectations differences quickly translate into price corrections. Especially in the context of tight liquidity at the end of the year, the transmission efficiency of expected adjustments has been significantly amplified.

CME margin increase triggers liquidity stampede

Technical factors further exacerbated the volatility. After the market close on December 29, the Chicago Mercantile Exchange (CME) announced an increase in the margin requirements for COMEX gold and silver futures. Although the announcement was released after the market closed, the market reacted in advance - some highly leveraged speculative funds chose to close their positions in late trading to avoid the pressure of margin calls.

Silver futures positions dropped significantly that day, and ETF funds also experienced outflows of more than US$200 million in a single day. This kind of "anticipation-driven early action" can easily trigger a chain reaction during periods of low liquidity: price drops → triggering stop losses → more liquidations → liquidity depletion → volatility amplification. Because the market size of silver is only one-tenth that of gold, its buffering capacity is even weaker, making it the main vehicle for stampedes.

Supply and demand fundamentals and market structure amplify fluctuations

Deep down, silver’s high volatility stems from its unique market structure. On the one hand, The supply side is highly rigid: more than 70% of global silver is a by-product of copper, lead, zinc and other main mines, and the production expansion cycle is as long as 8-9 years, making it difficult to respond to the surge in short-term demand; on the other hand, The demand side continues to expand: In 2025, the popularization of photovoltaic N-type batteries, AI server construction, new energy vehicles and other industries will push the proportion of industrial silver to nearly 65%, and the supply and demand gap will exist for a long time.

However, this fundamental support may be temporarily ignored in a market dominated by short-term sentiment. When the technical level breaks (such as falling below the key level of 80 US dollars), coupled with the actions of institutions at the end of the year to adjust positions and lock in profits, the huge gains accumulated in the early stage (a cumulative increase of more than 175% during the year) will become a catalyst for profit-taking, forming a periodic deviation of "fundamental support vs. financial selling pressure".

Conclusion: Fluctuation is the development of a mechanism, not a signal of direction

The gold and silver shock on December 29 was essentially the concentrated release of multiple mechanisms in a specific time window: geopolitical relaxation drew away safe-haven momentum, revisions in policy expectations suppressed valuations, margin adjustments triggered technical liquidation, and silver's own low liquidity and high speculative attributes amplified the entire process. This is not a sign of a trend reversal, but a rebalancing of the market's overly optimistic pricing in the special environment at the end of the year.

For market participants, understanding the driving chain behind fluctuations is more important than chasing price points. When liquidity, sentiment, policy and fundamentals intertwine, short-term prices may seriously deviate from medium- and long-term logic. Wmax Market Watch Reminder: In a high-volatility environment, identifying mechanisms is more practical than predicting directions.