Golden January 2026: Anatomy of a Bubble
Early 2026 will be remembered as the moment when precious metals stopped behaving like slow-moving safe havens. Golden January revealed how a multi-year bull market can morph into a full-blown bubble – and how violently it can burst.
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Golden January 2026:
The year 2026 has started with something truly extraordinary in the commodities markets.
The prices of precious metals, typically relatively slow-moving, began moving by several percent a day, culminating in a historical collapse where, for example, the price of silver fell nearly thirty percent in a single day.
What on earth happened?
In this article, we help the reader understand how this historical metal bubble developed and what conclusions should be drawn from it. We examine the birth of the precious metals price bubble through three "acts."
Act 1: Two-Year Bull Market
The events of recent weeks can be seen as a momentary climax in a development that began about two years ago.
In early 2024, theprice of gold ounce rose above the nearly magical milestone of 2,000 dollars. As can be seen from the graph below, during the preceding 15 years, the gold price had knocked on this level several times without permanently crossing it.
The crossing of this historical milestone gave a hint, that something bigger could be brewing.
The gold price was driven upward primarily by the purchasing programs of central banks. As the hegemonic position of the U.S. dollar became increasingly challenged, many began to diversify their risk into gold, which is regarded as a historical store of value. The rising geopolitical tensions naturally increased interest in a safe haven like gold. At the same time, growing inflation concerns gave birth to the story of the "debasement trade", where one prepares for the weakening of purchasing power by investing in, among other things, gold.
During 2024, the price of gold rose by nearly thirty percent. With this, it beat, for example, both the S&P 500 and Nasdaq 100 stock indices. While news headlines hyped the AI boom and, on the other hand, speculated whether stock markets were already in a bubble, the price of the ancient store of value kept rising quietly, outperfoming technology indices.
Despite all this, 2024 was only a prelude to what was coming.
In 2025, as geopolitical tensions grew, the threat of trade wars hung in the air, and inflation fears intensified, the dollar price of gold rose by as much as 65 percent in a year. Part of this rise was, of course, the weakening of the dollar itself, but even measured in euros, the price of gold rose about 45 percent.
Thus, the year 2026 started in the context of a historical bull market. The conditions for a gold bubble were ready.
Act 2: Bubble forms
The first signs of the birth of a gold price bubble could be seen in September–October 2025.
A special feature of momentary price bubbles is often a constant acceleration of price increase, a so-called parabolic rise.
According to traditional pricing heuristics, higher prices for an asset should cause decrease in buyers and increase in sellers, which should lead to a slowing of rally and to an eventual reversal. In parabolic rises, price increases are instead followed by even steeper rallying. Such price development is often a warning sign that the rally may not be sustainable.
From the beginning of September 2025 to mid-October 2025, the price of gold rose in such a parabolic way by about 25% in just over a month. The rise was followed by a sharp drop, where about half of the upward move was wiped away in just a week.
At the end of December 2025, the gold price began to turn into a new parabolic rise.
This time, the rise was even steeper than before. After crossing the old price record at the beginning of January 2026, the price rose again by about 25 percent, this time in only about three weeks. The price of silver skyrocketed by nearly 60 percent in three weeks.
On January 29th, both reached their tops: gold at about 5,600 dollars and silver at about 120 dollars.
The bubble was at its peak.
Act 3: Warsh Shock and the Bursting of the Bubble
Bubbles in the market can be thought to behave like balloons. A balloon pumped to the extreme can continue its movement until it hits any sharp object, that pops the bubble.
The gold bubble finally found its needle on Friday, January 30, 2026. The spark was the news of Kevin Warsh's appointment to lead the U.S. Federal Reserve.
Until this news, investment markets had priced in a "dove" promoting Donald Trump's policies, who would be ready to print money to support fiscal stimulus. Warsh, who is known rather as a strict inflation hawk, represented a reasonably large surprise in this regard. His appointment signaled to the market that the Fed might put the credibility of the dollar and the control of inflation ahead of political goals, or at least balance these more strongly than previously estimated.
The market's surprise resulted in a so-called liquidation crash. The U.S. Dollar Index (DXY) made its largest daily gain in ten years. The price of gold plunged 11% in a single day, which was the biggest daily drop in decades. The price of silver experienced an even more violent collapse, falling as much as 36% from its peaks.
Algorithms searched for stop-loss levels, and as margin calls were triggered, investors were forced to sell gold at any price to cover their losses in other sectors.
Digesting the news over the weekend brought no relief to gold's price pressures. While stock markets showed recovery on Monday, February 2, 2026, the gold price continued to fall. At its lowest, the gold price was more than 20 percent lower than its price peak from just two trading days prior, and the silver price was more than 40 percent lower than its own peak.
From Thursday to Monday, according to some estimates, as much as 15 trillion dollars was wiped away from the precious metals markets in a few days, including mining companies and other industry-related businesses. The sum corresponds to about half of the annual gross domestic product of the United States.
The bubble had burst.
Aftermath: What Next?
After a two-year strong bull market, a few-week market bubble, and the bursting of that bubble, what should be expected nextin precious metal market?
The short answer once again is: we do not know what will happen next. And neither does anyone else.
However, we can make some assessments of what gold's price development looks like right now. The most important, and perhaps counterintuitive, observation in our opinion is this:
Throughout the flash crash, the price of gold has still remained in an unambiguous uptrend. Its price is still clearly above the 50-day moving average. Even at the deepest bottom of the drop, it remained above the level from the beginning of the year.
Gold's momentary bubble may have burst, but it is still in a structural upward trend. Those following a trend-following strategy, therefore, do not yet have reason to exit the gold market.
On the other hand, it must be said that it would be a bit surprising if we were to see new records in the price of gold in the very near future. The prices of over 5,500 per ounce last week were reached as the market's internal momentum took a momentary upper hand over rational investors. While everything is, of course, possible, our primary assumption is not that we would return to an uptrend immediately. The most likely scenario would seem to be some kind of consolidation between 4,800 and 5,200 dollars.
What would make us change our minds and expect new price records? The 5,200 dollar level could be considered a sort of watershed. At that point, the price would have recovered more than two-thirds of the entire drop. In that case, it would be harder to consider it just a "dead cat bounce" and it would force a consideration of the possibility that we were already in an uptrend.
Confirmation of the end of the longer-term upward trend, in turn, would be signaled by the price falling below the lowest bottom of the drop, i.e., below 4,400 dollars.
At the moment, it therefore seems that the gold price has a truly massive " air pocket", about 800 dollars and 15 percent in size, in which the price can move without us being able to draw strong conclusions from the movements. Such a situation would have sounded quite absurd just a couple of years ago, but here we are, after over 100 percent price increase and a 20% flash crash.
As for price increases and volatility, the prices of precious metals have in recent months left behind both stock indices and the larger cryptocurrencies. Our interpretation is that this is, however, only small vibrations in a deeper undercurrent, where various inflation hedges and stores of value, independent of nation-states, are being completely re-priced.We continue to monitor both the price development of precious metals as well as other sectors of the financial markets and will keep you up to date.
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The information and sources presented are for illustrative purposes only. While obtained from sources deemed reliable, their accuracy cannot be guaranteed.