Precious Metals Face Sharp Correction as Investors Resort to Profit-Taking Ahead of Year-End

Gold and silver prices experienced a dramatic reversal on Monday, with traders rushing to lock in gains accumulated over preceding weeks. The sharp selloff signals a shift in market sentiment as the calendar year draws to a close and participants reassess risk exposure. December-delivery Comex gold plummeted $204.00, equivalent to 4.50%, settling at $4,325.10 per troy ounce, while silver contracted even more severely, sliding $6.63 or 8.67% to $69.856 per troy ounce.

Recent Momentum Before the Correction

The pullback stands in stark contrast to the remarkable bull run witnessed in prior sessions. Last Friday alone, December gold climbed 1.08% to $4,529.10 per troy ounce, marking the pinnacle of a three-week winning streak. Over the full trading week, the metal surged 3.85%, reaching record territory. Silver’s performance proved even more dramatic, gaining 7.68% on Friday to $76.486 per troy ounce, with a weekly rally of 14.42%—a fresh all-time high. The consecutive multi-week advances in both metals reflected strong safe-haven demand and inflation hedging appetite. However, when valuations reached unprecedented levels, profit-taking became inevitable as risk-conscious investors resort to booking gains to secure returns.

Geopolitical Backdrop Shifts

The metals correction coincides with cautiously optimistic developments on the diplomatic front. On Sunday, U.S. President Donald Trump convened with Ukrainian President Volodymyr Zelenskyy at Mar-a-Lago, signaling potential movement toward peace negotiations. Trump characterized the discussions as approaching resolution, stating the parties are “getting a lot closer, maybe very close,” while Zelenskyy described the outcome as yielding “significant results.” Prior to this meeting, Trump conducted extensive talks with Russian President Vladimir Putin, describing the conversation as “excellent” and noting Russia’s characterization as “friendly, benevolent, and business-like.” Any reduction in Russia-Ukraine conflict tensions typically reduces demand for safe-haven assets like gold.

However, offsetting geopolitical risks have intensified elsewhere. In South America, the U.S.-Venezuela relationship has deteriorated sharply, with Trump claiming direct U.S. military action against Venezuelan facilities. This escalation follows months of tensions over alleged prisoner transfers and narco-trafficking, culminating in a declared “naval blockade” of Venezuelan sanctioned vessels. The U.S. military has already seized two major oil tankers, with Trump signaling intention to retain or auction the confiscated crude. Given Venezuela’s position as the world’s largest oil reserve holder and its close alignment with Russia and China, further escalation poses systemic risk to global stability. While neither Moscow nor Beijing has intervened militarily—though China remains a substantial buyer of Venezuelan petroleum—analysts caution that deeper Chinese involvement could substantially amplify the crisis.

Monetary Policy Expectations Drive Medium-Term Outlook

Near-term gold and silver movements will likely hinge on Federal Reserve guidance. Market participants are actively reviewing minutes from December’s policy meeting for signals regarding future interest rate direction. Despite Fed Chair Jerome Powell’s previous warnings against assuming rate cuts are automatic, combined with mixed signals from individual governors, current market pricing via CME Group’s FedWatch Tool suggests a 16.1% probability of a 25-basis-point reduction at the January 27-28 gathering. The Fed’s next communication could materially influence U.S. dollar valuation and, by extension, precious metal quotations in the coming weeks.