Gold and silver have both retreated sharply from their January 2025 highs, falling below key psychological milestones. Gold has fallen about 28% from its January high of $5,600 and is now trading below $4,000 per ounce, while silver has fallen more than 50% to fall below $59 per ounce. ounce Wednesday.
The sell-off is mainly driven by growing fears of tighter monetary policy under new Federal Reserve Chairman Kevin Warsh. Markets are currently pricing in two 25 basis point rate hikes by March 2027, which would lift the federal funds rate to 4.00%-4.25% on renewed inflation fears.
The reversal marks a dramatic shift from the dominant macro narrative of 2025, the “deterioration trade,” the belief that persistent fiscal deficits and rising government debt would continue to erode the purchasing power of fiat currencies.
However, Bitcoin largely stagnated through most of 2025, trading around the $100,000 level, while gold and silver rallied aggressively. The divergence led many investors to question whether bitcoin still belonged in the deterioration trade and whether its role as a hedge against fiat currency dilution had weakened.
