Core Viewpoint - The recent significant drop in precious metals prices, including gold and silver, is attributed to market reactions to Kevin Warsh's nomination as the next Federal Reserve Chairman, which has alleviated concerns about the Fed's independence and strengthened the dollar [1][2]. Group 1: Market Reactions - The COMEX silver price plummeted over 35%, reaching a low of $74 per ounce, while COMEX gold fell more than 10%, nearing $4700 [1]. - Platinum and palladium futures on the London Metal Exchange (LME) also saw declines exceeding 15%, entering a technical bear market alongside silver [1]. - Analysts suggest that the panic selling was driven by profit-taking and crowded trading positions, with leveraged positions exacerbating market volatility [1][2]. Group 2: Investor Sentiment - The market is currently trading on "hawkish" expectations regarding Warsh's nomination, which is stabilizing the dollar and reducing the asymmetric risks of a significant dollar depreciation, leading to the sharp declines in gold and silver prices [2]. - The recent market behavior is characterized as irrational, with the drop likely resulting from "forced selling" due to the accumulation of leveraged positions in precious metals [2][3]. - Retail investor sentiment has been identified as a significant driver of recent silver price fluctuations, indicating a potential for profit-taking [3]. Group 3: Demand and Supply Dynamics - The World Gold Council reported that global gold demand reached a record high last year, with total demand projected to exceed 5000 tons by Q4 2025, valued at $555 billion, marking a 45% year-on-year increase [4][5]. - The increase in gold ETF holdings by 801 tons represents the second-highest annual growth, with a notable surge in Q4 [4]. - Despite a slowdown in central bank gold purchases, the demand for gold as a hedge and for portfolio diversification remains strong, influenced by geopolitical tensions and economic policies [5][6]. Group 4: Future Projections - A hypothesis suggests that if private investors increase their gold allocation from 3% to 4.6%, gold prices could theoretically rise to between $8000 and $8500 per ounce, although this path may be fraught with challenges [6]. - The current overbought status of gold and silver indicates a risk of profit-taking and price corrections in the short term, but the long-term bullish outlook for gold remains intact [6].