Gold plunges 5% as silver drops 7% in biggest fall since 2011

On Tuesday, October 20, 2025, Ole Hansen, head of commodity strategy at Saxo Bank, watched as gold tumbled $235 to $4,087.70 per ounce – a 5.39% slide – while Delwin Limas, strategist at UBS Global Wealth Management, noted the plunge was the steepest single‑day drop since June 2013. At the same time, Lobo Tiggre, founder of The Independent Speculator, warned that silver’s 7.2% fall to $48.66 was unusually close to gold’s move, a divergence that could reshape trading strategies. The market shock came just a day after gold hit a record $4,374 per ounce and against the backdrop of impending Federal Reserve rate cuts, a lingering U.S. government shutdown, and heightened geopolitical risk.

Backdrop: A nine‑week rally that rewrote the 2025 metal story

Since early August, precious metals have been on a tear. Gold surged roughly 31% and silver an eye‑popping 45%, propelled by a mix of macro‑economic uncertainty and investor appetite for safe havens. Throughout the rally, central banks across Europe and Asia quietly added to their reserves, while President Donald Trump’s tariff regime kept inflation expectations high.

Data from the Bureau of Economic Analysis released on October 15 showed U.S. consumer inflation lingering at 3.8% year‑over‑year, reinforcing fears that the Federal Reserve would have to keep policy accommodative. Analysts at UBS argued that “elevated global debt levels and large fiscal deficits” were feeding the metals’ rally, a view echoed by Commodity Futures Trading Commission—though the agency was unable to release official positioning data because of the ongoing shutdown that began in early October.

The October 20 sell‑off: Numbers, triggers, and immediate market reaction

When the bell rang on October 20, the front‑month gold contract on the COMEX slid $235, settling at $4,087.70 per ounce – a 5.39% drop, the largest percentage loss since September 2011. Silver’s spot price fell $3.72, a 7.2% decline, taking it to $48.66, its deepest single‑day loss since September 2011.

• Gold: $4,374 high on Oct 19 → $4,087.70 on Oct 20 (‑5.39%)
• Silver: $52.38 high on Oct 19 → $48.66 on Oct 20 (‑7.2%)
• Trading volume spiked 42% above the 30‑day average.
• U.S. Dollar Index rose 0.6% against a basket of major currencies.

The sell‑off was sparked by gold’s failure to break decisively above the $4,380 psychological barrier. Automated trading algorithms triggered stop‑loss orders, while profit‑taking by hedge funds accelerated the descent. Meanwhile, a firmer U.S. dollar and a sudden appetite for risk‑on equities in Europe added pressure, as investors shifted away from safe‑haven assets.

Analyst commentary: Why the correction was inevitable

“After a 65% year‑to‑date gain, the market was overdue for a pull‑back,” Ole Hansen told Bloomberg in a post‑market interview. He added that the “cascade of automated selling” was “built into the system” once gold hovered just below the $4,380 level.

Delwin Limas of UBS maintained the firm’s $4,600 2025 price target for gold, arguing that “debt concerns and anticipated Fed cuts will keep the metal’s fundamentals strong, even if short‑term volatility spikes.”

Conversely, Lobo Tiggre highlighted silver’s tighter alignment with gold this year, noting, “Silver is flexing its monetary‑metal muscles more than it has in recent years, which is a good sign for bull‑ish investors.”

Divergence in the decline: Gold versus silver

Historically, silver’s percentage drops outpace gold’s during sharp corrections – sometimes by a factor of two. This time, the gap was narrower: 7.2% versus 5.39%. The reason, according to market observers, is that silver’s rally has been more tightly coupled with gold’s trajectory, reducing its typical “copper‑like” behavior. That shift may indicate a longer‑term re‑pricing of silver as a true monetary metal rather than a mere industrial play.

Data from the World Silver Survey (June 2025) showed industrial demand up 8% YoY, but monetary demand (central banks and ETFs) surged 32%, narrowing the demand mix and making silver’s price more responsive to safe‑haven flows.

Looking ahead: What could drive the next move?

Several forces are poised to shape the metals market in the coming months:

1. Federal Reserve policy – The Fed signaled in its September 2025 minutes that at least two more 25‑basis‑point cuts are likely before year‑end, which could push real U.S. rates below zero.
2. U.S. government shutdown – Prolonged fiscal deadlock may revive safe‑haven demand if economic data worsens.
3. Geopolitical flashpoints – Tensions in the South China Sea and the Middle East continue to fuel uncertainty.
4. Central bank buying – The IMF’s October 2025 report projects a net inflow of $80 billion into gold reserves this year.

If the Fed follows through on its dovish stance, analysts at UBS expect gold to reclaim its $4,600 target by early 2026, while silver could edge toward $55 per ounce, provided industrial demand stays robust.

Historical parallels: 2011 versus 2025

The 2011 precious‑metal boom saw silver peak at $49.82 before sliding into a five‑year bear market. Back then, the market correction was rapid and deep, mirroring what Ole Hansen described for 2025: “When the reversal materialised, it was both swift and severe.” Yet the macro backdrop differs – 2025’s inflationary pressures and fiscal deficits are far larger, suggesting that any future rally could be more sustainable.

One lesson from 2011 is that a steep correction can reset market expectations, creating a healthier price discovery process. For today’s investors, that means staying vigilant about both technical triggers (like the $4,380 barrier) and fundamental shifts (Fed policy, debt dynamics).