Gold Spot Price Drops 27%, Silver Falls Over 50% but Supply-Demand Imbalance Still Supports Precious Metals Market

On October 17, the gold spot price has fallen about 27% to around $4,112 after reaching a historical high of $5,608 per ounce in January this year. Silver has also dropped from a January high of $121.62 to around $56, a decline of over 50%. Despite the significant price drop, supply pressures in the physical market remain. According to the World Gold Council, global central bank gold purchases reached 288.9 tons in the second quarter of 2026, a record high for the same period, up 62% year-on-year. The Silver Institute expects the global silver market supply gap to widen to 46.3 million ounces in 2026, marking the sixth consecutive year of supply deficit, with limited growth in mine supply. The demand structure is changing; although the amount of silver used in photovoltaics is expected to continue to decline, growth in demand from data centers, electric vehicles, and grid upgrades may partially offset the impact of reduced silver use in photovoltaics. The mining development cycle is long, and new supply is slow to respond to changes in demand. This adjustment in gold and silver prices may reflect the clearing of speculative positions rather than a complete alleviation of the physical supply-demand contradiction. The U.S. fiscal deficit, rising interest expenditures, and the demand for central banks to diversify reserves may continue to provide long-term support for gold, but changes in trade policies, weakening industrial demand, and the release of new mining capacities may still alter market trends.

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