Why the Recent Pullback Across Precious Metal Markets?

Precious metals have pulled back significantly since the war in Iran began, with gold and silver down 15% and 18% respectively in USD terms.

The last week saw some of the sharpest price drops, with gold in particular marking its largest weekly sell off since 1983.

Prices began the week trading just over USD $5,000oz, before falling to a low of USD $4,097oz. That equates to a total drop of USD $915oz, or 18%. Prices for both gold and silver have recovered swifty following the March 23^rd lows, with gold trading up around USD $4,518oz while silver is close to USD $71oz.

The gold-to-silver ratio currently sits at 62:1, broadly unchanged from the start of the year and remains close to its long-term historical average.

The recent pullback and elevated volatility across precious metal markets can largely be attributed to a confluence of macroeconomic headwinds that have emerged since the start of the war in Iran.

Chief among these has been the resurgence in the U.S. dollar, with the dollar index (DXY) rising approximately 2.2% since late February, placing downward pressure on USD denominated commodities like gold.

At the same time, real yields have moved meaningfully higher, with the U.S. 10-year real yield increasing by over 25 basis points to around 2% at current, while nominal yields have climbed toward the 4.5% mark. This shift in the rates environment has reduced the relative attractiveness of non-yielding assets such as gold in comparison to yielding assets like cash and bonds, particularly in the short term.

This has been further compounded by a shift in market expectations surrounding monetary policy, with the likelihood of a rate cut this year from the Federal Reserve diminishing in recent weeks.

In addition, the scale of the recent rally in gold created substantial scope for a degree of profit taking from investors, with the precious metal up by almost 100% in the 12 months to end January.

As a result, both investor positioning and the near-term macro backdrop becoming less supportive for precious metals contributed to the correction observed across the complex.

It is also worth noting that gold’s exceptional liquidity, and complete absence of credit risk (characteristics that are huge advantages over the medium- to long-term) likely worked against it over the last couple of weeks—as it did when the Global Financial Crisis first hit. By contrast, investors in other asset classes such as private credit are finding out the hard way that in certain circumstances, they literally can’t sell their assets.

What happens next?

Historically, a pullback of the magnitude we have seen in recent weeks is not unusual within a long-term secular bull market. This is especially so after periods of sustained outperformance which we saw up until the January highs, when gold and silver prices traded above USD $5,500oz and $115oz respectively.

In the aftermath of such price surges, we often see gold mean revert toward its 200-day moving average (200 DMA). This has been seen many times over the 25-year secular bull market, with recent examples of this occurring in 2016, 2017, 2020, 2022 and most recently in 2026.

This is illustrated in the figure below, which highlights the extent to which the gold spot price has deviated from its 200-day moving average, both in absolute dollar terms and on a percentage basis.

Figure 1

In 2020 for example, the gold spot price peaked above USD $2,000oz. At the time, that was some 25% above the 200 DMA (USD $1,634oz).

Six months later, the gold price bottomed out, falling below USD $1,700oz, finishing that corrective period 9% below the 200 DMA. In spot price terms, that correction represented a total drop of 18%.

At its peak this year above USD $5,400oz, gold was trading more than 40% above its 200 DMA, marking the most extended level historically speaking since 1980.

This was widely regarded as the end of the previous secular bull market in precious metals—driven by rampant inflation, the 1979 energy crisis and significant geopolitical instability, particularly the Soviet Union’s invasion of Afghanistan.

By way of reference, gold was 139% above its 200 DMA at the top of the 1970s secular bull market.

Back to the current market cycle, and while prices have retraced by around 15% since their January highs, gold remains elevated at roughly 10% above the 200 DMA. This indicates that positioning is still somewhat stretched despite the recent correction. In this context, a further mean reversion toward the 200 DMA would not be surprising.

Moreover, downside overshoots below the 200 DMA are not uncommon during corrective phases, suggesting that a trough forming up to 10% below the 200 DMA remains a plausible scenario. Based on current levels, this would imply a potential downside target in the vicinity of USD $3,700oz.

It should however be noted that the 200 DMA is rising, and will likely be closer to USD $4,400oz within the next three months, though this does depend on what happens to prices in that time.

Given this market history, we are of the view here at ABC Bullion that this pullback is a healthy part of the ongoing bull market. Further, these periods often provide some of the best buying opportunities for longer-term precious metal investors.

Thank you for choosing ABC Bullion

Jordan Eliseo
General Manager, ABC Bullion

Luke Tyler
Market and Business Analyst, ABC Bullion

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