Gold Experiences Sharpest One-Day Decline in Over Two Months: Is the "Metal Season" Coming to a Close?

Gold fell over 5% in its most significant one-day decline in over two months. Additionally, silver, platinum, and palladium were caught in a widespread selloff of precious metals on December 29.

Key Takeaways

Gold saw a significant 5% drop, marking its largest decline in over two months.
Precious metals, including silver, platinum, and palladium also experienced sharp sell-offs.
The cryptocurrency market witnessed a recovery, with Bitcoin and Ethereum gaining ground.
Analysts are divided on whether the recent shifts represent a temporary trend or a more significant market rotation.
Gold's long-term performance indicates resilience, but technical signals suggest potential capital rotation into cryptocurrencies.

As prices have started to recover today, analysts are divided. Some believe this positive momentum will continue, while others caution that a shift could favor cryptocurrency assets.

Precious Metals and Crypto Show Divergent Trends Amid Increased Volatility

On December 29, the precious metals market faced a major downturn. Gold plummeted more than 5%, marking its most considerable single-day loss since late October 2025.

Silver briefly hit new record highs near $84 before plummeting sharply to close at around $70.5, resulting in a 16% decrease. Palladium saw similar declines, and platinum also dropped by over 15%. These declines followed a remarkable rally that had pushed precious metals to fresh highs earlier this month.

As noted by The Kobeissi Letter, "As we stated last night, the rally was becoming excessive. Anticipate increased volatility."

While precious metals fell, the cryptocurrency market bounced back, with Bitcoin briefly reaching the $90,000 threshold and Ethereum climbing to $3,000. This led some analysts to speculate that a rotation of capital was beginning.

"Silver dropped 11% within a few hours as crypto started to rise. Capital is shifting from silver and gold into Bitcoin and the larger crypto market," commented Crypto Rover.

However, the drop in metal prices was short-lived. Precious metals are back in the green today, with gold gaining nearly 1% over the last 24 hours. Silver has jumped 3%, platinum has risen 2.6%, while palladium continues to experience slight losses.

As the metals recovered, the cryptocurrency market faced a downturn. The total market capitalization decreased by 0.13% over the past day, reflecting mixed signals and leaving analysts uncertain about the market's next move.

Gold's Performance Strengthens Bullish Outlook

Many analysts contend that the recent decline in precious metals does not indicate a shift in overall demand. There remains an expectation that the rally could persist into next year.

"Such a synchronized drop typically signals an unwinding of a crowded trade, rather than a sudden change in underlying demand for metals," stated a professional investor.

Furthermore, the Kobeissi Letter emphasized that gold has been trading above its 200-day moving average for around 550 trading days, marking the second longest streak recorded. The only longer streak came after the 2008 financial crisis, when gold remained above this level for nearly 750 trading days. During its current streak, gold prices have surged 135%, surpassing the 91% increase recorded between 2009 and 2011.

In comparison, the 1986-1988 cycle lasted about 510 sessions with a 38% rise, while the 1978-1980 period saw gold increase by 209% over approximately 495 sessions.

"Gold's momentum remains historically robust," the post stated.

The Argument for Capital Rotation

Conversely, one market analyst pointed out that significant corrections in gold often affect investor sentiment and can result in capital rotation.

"Although some anticipate a recovery, these discrepancies may suggest a deeper change in market focus, which could be advantageous for assets like Bitcoin," remarked Professor Crypto.

From a technical perspective, analyst Michaël van de Poppe noted that several bearish divergences have emerged on different timeframes, indicating a decline in momentum despite recent new peaks. He explained,

"Gold has corrected significantly... Even though the discussion around the room may not focus on a prolonged correction, the fact that it dropped below the previous all-time high isn't encouraging. This is likely the stage where many will believe there’s another uplifting movement on the horizon, while the same group will criticize Bitcoin for not moving up. That's when the rotation happens."

Additionally, in another observation, Van de Poppe noted a bullish divergence on the daily BTC/gold chart, suggesting that Bitcoin is poised to outperform gold in the foreseeable future.

"Similar instances of such a bullish divergence occurred in Q3 2024 (just before Bitcoin surged towards the $100,000 mark) and Q4 2022 (the end of Bitcoin's bear market). A significant rotation is imminent," he added.

BTC/GOLD Divergence. Source: X/CryptoMichNL

As a result, the fluctuations in both precious metals and cryptocurrencies highlight rising market volatility and increasing uncertainty regarding capital flows. While gold's long-term trend continues to be historically strong, the technical indicators and relative performance suggest that investors are increasingly looking towards alternative assets.

Whether the recent movements represent a temporary divergence or the initial phases of a broader rotation remains uncertain.