Those of us who invest understand that history does not simply repeat itself, but it often follows similar patterns, and this is especially true in the gold and silver markets. Looking back at the century-long trend of precious metals, the endings of two super bull market frenzies were marked by tragedy: gold was halved, and silver dropped by seventy percent, leaving countless latecomers trapped at the peak. Now, gold and silver have once again entered a frenzy of skyrocketing prices, continuously reaching new highs, and the market is abuzz with excitement, with some calling for gold to break 6200 dollars and silver to hit 150 dollars. However, behind the revelry, investors are anxious: will this round of skyrocketing prices lead to a repeat of historical disasters?
Looking back at those two historic crashes, the more crazily it rose, the more brutally it fell, and the underlying rules still apply in the market today. The bull market from 1979 to 1980 was the result of extreme inflation and capital speculation pushed to the limit. The second was triggered by the oil crisis leading to a price surge, with the craziest period seeing an increase of over 8 times in one year. However, the Federal Reserve's Volcker implemented aggressive interest rate hikes of 20%, directly puncturing the bubble. In just two months, gold was cut in half, and silver lost two-thirds of its value, leading to a 20-year freeze in the precious metals market, with many major players declaring bankruptcy due to market manipulation.
The bull market of 2010-2011 was nothing more than a different shell of speculation. The massive liquidity generated by quantitative easing had nowhere to go, causing gold to rise from $1000 to a historic high of $1921, and silver to return to the $50 high. However, when the US economy recovered and the Federal Reserve signaled tightening liquidity, risk aversion sentiment faded, leading gold to directly pull back 45% and silver to drop 70%. After that came years of sluggish performance, with those investors who chased prices at high levels unable to break even for years.
These two rounds of sharp declines seem to be triggered by different historical backgrounds, but they conceal an unchanging rule in the precious metals market: the more wildly it rises, the more severely it falls. The core drivers of both bull markets are short-term risk events, either out-of-control inflation or an excess of liquidity, which accumulate into huge bubbles. When policies shift and driving factors disappear, the bursting of the bubble becomes inevitable, with gold averaging a pullback of over 30%, and silver often exceeding 50%. This set of data has become an unavoidable curse in the precious metals market.
Looking at the current market, it indeed has a new script, which is why many people believe 'this time is different.' First, the ongoing increase in holdings by global central banks, with central banks in China, Russia, and others collectively adding 120 tons of gold in the first quarter of 2026, and the People's Bank of China increasing its holdings for 12 consecutive months, accumulating a total of 280 tons. As the largest buyer of gold, central banks have become the recognized 'supporting force' in the market. Secondly, the global trend of de-dollarization, with countries increasing gold allocations to mitigate risks in foreign exchange reserves, even as gold prices rise, central bank demand remains strong. Additionally, there is a surge in industrial demand for silver, reaching a near decade high.
It is precisely because of this that the bullish confidence in this round of market is strong. Wall Street institutions are raising their target prices one after another, with JPMorgan expecting gold to reach $5400 per ounce, and Bank of America stating that gold prices will hit $6000 in the spring of 2026. Silver is also expected to surge to $100 or even $130 due to supply-demand gaps. Funds in the market are flooding in, with non-commercial positions in COMEX gold futures increasing by 18% year-on-year, and silver ETF holdings hitting a historic high. It seems that a new super bull market is on the horizon.
But investors are well aware that the more frenzied the market, the more they need to remain clear-headed. The underlying logic of the precious metals market is that 'a sharp rise must be followed by a pullback.' The current market has already deviated from historical valuation norms, and no one can accurately predict where the peak is. Some say it will be in the second quarter of 2026, while others believe it will last until the end of the year. However, one thing is certain: the more violently it rises, the greater the adjustment will be in the future.
Although central banks increasing their holdings can provide a floor, it is not an infinite buying spree. Their pace of gold purchases will adjust with price changes and they cannot cover speculative funds; once the global economic recovery falls short of expectations, and de-dollarization becomes a long-term trend, it is difficult to sustain a continuous surge in gold prices, being more driven by emotional factors. These elements all contribute to the enormous risk of a pullback hidden within this round of crazy surges.
What is even more concerning is that signs of speculative overheating have already appeared in the market. Many retail investors are chasing prices higher, even leveraging their positions, which often signals that the market is peaking. Once there is any sign of change, such as rising expectations for the Federal Reserve to raise interest rates or easing geopolitical conflicts, funds will rush to escape, triggering a stampede-like decline.
For today's investors, instead of being entangled in whether history will repeat itself, it is better to develop a response strategy. For investors who already have positions, it might be wise to take profits in batches and lock in some gains, without hoping to catch the final wave of the market; for those looking to enter the market, avoid chasing high prices at elevated levels, and patiently wait for opportunities to buy at lower levels after a pullback. After all, while the long-term trend for precious metals is good, short-term pullbacks can significantly shrink accounts; for leveraged investors, it is even more critical to exit in time, as leverage amplifies risks, making losses unbearable when a sharp decline occurs.
Ultimately, gold and silver have never been tools for getting rich overnight; rather, they are the ballast stones of asset allocation. The tragic lessons of the two crashes have long told us that ignoring the rules and frantically chasing prices will ultimately come at a painful cost. Even if there is a new script in this round of market, it cannot escape the basic rules of the market. After the revelry, it is highly likely that a deep adjustment will follow, and this is something every investor should keep in mind.
