Skyrocketing, booming, crashing—the leading roles of gold and silver make the “opening blockbuster” of the 2026 market especially spectacular.
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In an era on Wall Street where retail investors are piling in alongside crowded institutional positions, this week’s market demonstrated the fragility of consensus—even small fluctuations can trigger dramatic turbulence when trades become extremely crowded.
As reported by Wallstreetcn, on Friday, Trump nominated Warsh as the Federal Reserve Chair, triggering a “bloodbath” in precious metals. Gold plunged 10%, erasing $5 trillion in market value over the past two days. Spot silver at one point crashed 37%, spot platinum slumped over 16%, and New York copper gave up all of yesterday’s gains.
(Price trends of gold, silver, copper, and platinum in January)
Following recent consecutive surges in gold and silver prices, crowded long positions, record call option buying, and extreme leverage have put the market in a state where a “gamma squeeze” could be triggered at any moment. Michael Brown, Senior Research Strategist at Pepperstone, said:
The market is extremely bubbly—it only takes a small trigger to cause moves like this.
Besides precious metals, other consensus trades also came under pressure. On Friday, the US dollar index recorded its largest one-day gain since May, delivering a heavy blow to dollar short sellers. The performance of emerging market stocks relative to US stocks hit the worst level for the period; much-hyped AI trades also wavered.
Trillions of dollars flowed quickly in a short time frame, with heavy position allocations leaving almost no margin for error. Emily Roland, Co-Chief Investment Strategist at Manulife John Hancock Investments, said:
Anything that goes up in a parabolic fashion usually comes down the same way—a lot of this feels driven by momentum, technicals, and sentiment.
Crowded Trades Extend Across Multiple Markets
Market crowding was evident even before the plunge in precious metal prices.
BofA’s January fund manager survey showed that going long gold was the world’s most crowded trade. Demand was so strong that gold prices were at one point 44% above long-term trend lines—the first time such a premium had occurred since 1980.
According to Renaissance Macro Research citing Consensus data, the weekly silver sentiment index based on broker strategists and newsletter writers surged to the highest level since 1998.
In a market where positions are highly aligned and leverage is quietly accumulating below the surface, this is enough to trigger sharp one-day drops. What’s alerting is that the same one-sided bets are visible in multiple markets.
This month, the dollar was sold off for a third consecutive month, posting its worst start to the year in eight years, with its exchange rate against other fiat currencies dropping to the lowest since July 2022.
But in the past two days, during the market turmoil, the dollar saw some buying.Friday saw the dollar post its best single-day performance since May 2025.
(Dollar index rebounds at month’s end)
The stock market also saw similar crowded trades. The MSCI Emerging Markets Index outperformed the S&P 500 by a margin not seen since 2022. Yet after a month of sharp rises, US momentum stocks corrected in the past two days.
(Momentum stocks fell in the past two days)
The Russell 2000 index, after outperforming the S&P 500 for 14 straight trading days, lagged behind the S&P 500 for the past 6 sessions.
(Small-cap index underperformed S&P 500 in the past 6 trading days)
The precious metals crash could serve as an early warning for other crowded trades that have remained stable so far. Keith Lerner, Chief Market Strategist at Truist Advisory Services, bluntly stated:
Consensus is always right—except in extreme cases.
The Struggle and Questions of Contrarian Trades
This week’s turmoil also raised a deeper question: In a momentum-dominated market, is there still space for contrarian investors, and what is the cost of swimming against the tide before consensus reverses?
Rich Weiss, Chief Investment Officer, Multi-Asset Strategies at American Century Investments, was among the investors who took a contrarian stance on some mainstream trades since the end of last year. His portfolio began tilting toward US stocks rather than international markets, a move that has thus far not fared well as non-US assets rose sharply.
But he sticks to his stance, confident that growing profits will help US companies continue to outperform overseas rivals. Weiss said:
Although the trend isn’t in our favor, we see the fundamentals as favorable. Momentum trading is like picking up nickels in front of a steamroller. It works until it doesn’t.
While Friday’s volatility wasn’t enough to completely destroy the popular trades, some investors are starting to wonder if this is an early sign to exit.
Jeff Muhlenkamp has been taking advantage of the rally in gold; his $270 million fund is up nearly 10% this year. The gold drop isn’t good news, but exiting too early could mean missing out on years of gains if the price rebounds.
The question I have to ask now is, how much more can it fall? I haven’t reached a conclusion yet.
Risk disclaimer and liability clauseThe market has risks, and investments should be made with caution. This article does not constitute personal investment advice and does not take individual users’ special investment objectives, financial situations, or needs into account. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their specific situation. Investment is at your own risk.
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