At the start of 2026, gold and silver prices hit record highs, but they took a significant dip on Friday.
Gold reached a peak of over 5,500 USD (approximately A$7,900 per ounce) for the first time on Thursday, outpacing previous records. However, by the end of Friday, it dropped to around US$5,068 (A$7,282).
Silver experienced even more rapid gains, recently surpassing US$120 (A$172) an ounce, the highest in decades, before crashing to US$98.50 (A$141.50) on Friday.
So why did these metals experience such dramatic fluctuations? And what should regular investors be aware of when it comes to the risks associated with investing in precious metals now?
Factors Behind Gold’s New Highs
Gold is widely regarded as a safe-haven asset—a choice for those looking to protect their savings amid financial uncertainty.
With escalating international tensions, the possibility of trade wars, and shifting interest rate signals, investors are drawn to assets that offer stability in an otherwise unpredictable environment.
Friday’s decline in gold and silver prices was largely influenced by the announcement that Donald Trump has chosen Kevin Warsh to lead the US Federal Reserve, a development that rattled the financial markets. The central bank is pivotal for global economic stability.
Central banks worldwide are rapidly accumulating gold, increasingly seen as a reliable asset during turbulent times.
But it’s not just institutions driving these trends—retail investors are playing a significant role as well. Many are viewing gold, silver, and other precious metals as a hedge against uncertainty, often joining in as momentum builds.
As prices rise, more everyday investors are turning to gold, particularly through gold exchange-traded funds (ETFs), which allow easier access without the need to physically store gold bullion.
What’s Driving Silver Prices Up?
While gold captured much attention in 2025, silver has been the real standout. Before the selloff on Friday, the metal had surged over 60% in just a month, significantly outpacing gold’s roughly 30% increase.
Silver’s unique appeal lies in its industrial applications, which are on the rise. Its demand is growing in clean energy technologies, including solar panels, electric vehicles, and semiconductors.
This dual nature—not just as a safe haven but also as a high-demand commodity—is attracting investors keen on capitalizing on the ongoing price rises.
Interestingly, every solar panel contains about 20 grams of silver, and the solar power sector accounts for nearly 30% of total global silver demand.
Electric vehicles and AI data centers also require considerable amounts of silver.
Moreover, the silver market is facing a fifth consecutive year of supply shortages. We consume more silver than we mine, and a substantial portion is a byproduct of other metal extraction—it’s not something that can simply be ramped up.
Retail Investors Increasing Silver Holdings
One popular platform among retail investors in Australia is CommSec, which has 3 million users.
Data from Bloomberg shows a marked increase in retail purchases of silver ETFs over the last year.
Trading for CommSec gold ETFs has risen by 47%, with total net long positions reaching A$158 million, solidifying gold’s position in investment portfolios.
Despite overall investment in silver slightly lower at A$104 million, trading activity in silver exploded by about 1,000% year-on-year. This trend indicates that retail investors are making smaller, more frequent trades, often chasing the momentum created by rising prices.
With gold as a steady anchor, silver is increasingly viewed as a speculative opportunity.
Its cheaper price per ounce, along with its industrial demand narrative and social media buzz, makes silver particularly attractive to retail investors who want to invest in precious metals without the hefty cost of gold.
Key Risks for Investors
While data shows Australian retail investors are buying as prices rise, this “fear of missing out” strategy carries notable risks.
Volatility can swing both ways. From February 2025 until Friday, silver’s price surged 269%. However, this rapid gain came with an annualized volatility of 36%, almost double gold’s 20% during the same timeframe.
What does this volatility mean? As we’ve seen, assets that quickly rise can also rapidly fall.
Buying at highs is precarious. Often, retail investors rush in after a big surge, only to find they’ve bought near the peak. In contrast, professional investors and central banks have accumulated gold and silver at much lower prices over time.
No yield, high risk. Unlike stocks or bonds, precious metals don’t yield dividends or interest. Investors’ overall returns depend solely on price appreciation, which, as recent events have shown, can be quite volatile.
Be prudent. Financial advisors typically suggest allocating around 5-15% to precious metals within a diversified portfolio. Following such drastic price movements, adhering to this guideline is more crucial than ever.
Disclaimer: This article provides general information only and is not intended as financial advice. All investments involve risk.
