Gold soared above $5500, silver got close to $120. Is the market disconnected from reality?

Gold and silver continued to skyrocket in price and set records despite the US Federal Reserve's decision not to cut interest rates. There are warnings in the market that precious metals prices are becoming increasingly detached from reality.

The spot price of gold on January 29 for the first time rose above $5500 per troy ounce. Quotes of the metal jumped more than 3%, continuing the rally after a jump of 4.6% in the previous session - the maximum increase for the day since the peak of the coronavirus pandemic in March 2020, reports Bloomberg. Silver hit $119.34 an ounce in trading Thursday, also breaking a record. Gold is already up more than 27% in 2026. Silver has soared more than 60% since the beginning of this year, Reuters states.

Gold and silver have pulled the entire precious metals sector, from platinum to palladium, and even base metals, CNBC notes. "We've been predicting a rapid rise in gold prices since early last year," the network quotes Yardeni Research President Ed Yardeni as saying. - [But] it turned into a price rush for all precious metals, many base metals and rare earth elements."

"I would characterize precious metals markets as 'broken' given the unheard of volatility," Nicky Shiels of MKS PAMP told CNBC. Analysts interviewed by the channel said prices are now being affected by volatile liquidity flows rather than actual supply and demand. This causes extreme swings and a disconnect from fundamentals. After the frenzied rally of the past two months, precious metals are "tactically overbought," according to Shils.

"Gold is no longer simply a hedge against crisis or inflation; it is increasingly seen as a neutral and reliable asset for preserving value that also provides diversification across a wide range of macroeconomic regimes," Reuters quoted an OCBC research note as saying.

"While the parabolic nature of the rally suggests a pullback is just around the corner, fundamentals are expected to remain favorable throughout 2026, making any drawdowns attractive buying opportunities," said IG analyst Tony Sycamore.

Bloomberg notes that traders ignored the decision of the U.S. Federal Reserve to leave the interest rate unchanged. The market expects that the current head of the regulator Jerome Powell in May will be replaced by Rick Reeder from BlackRock or another supporter of easing monetary policy. "Dovish" reversal of the U.S. Central Bank will increase the attractiveness of precious metals as non-interest earning assets, the article says.

This article was AI-translated and verified by a human editor