Gold and Silver Erase $1.1 Trillion in 12 Hours as AI Speculation Rattles Markets

TL;DR

Gold and silver lost a combined $1.1 trillion in market cap within 12 hours on February 24
Gold fell to $5,121/oz, down from its January all-time high of $5,589
AI-driven algorithmic selling and forced liquidation from tech losses amplified the crash
Silver dropped to $87.87/oz - down 27% from its $121 peak last month
Major banks still forecast $6,000-$6,300 gold by year-end despite the carnage

$1.1 Trillion Gone in Half a Day

Gold and silver markets shed $1.1 trillion in combined market capitalization during a brutal 12-hour window on February 24, according to data tracked by The Kobeissi Letter. Gold dropped to $5,121 per ounce by 9:10 a.m. ET - a 4.1% decline from its prior close of $5,150 - while silver cratered to $87.87 per ounce, extending a 15% loss from just one month earlier.

The selloff is the latest episode in what has become the most volatile stretch for precious metals in over four decades. Since peaking at all-time highs in late January - gold at $5,589/oz and silver above $121/oz - both metals have endured a series of crashes, flash crashes, and whiplash recoveries that have left traders shell-shocked.

The AI Connection - It's Not What You Think

The headline blames "AI speculation," but the actual mechanism is more nuanced than a simple rotation out of gold and into tech stocks. Three distinct forces are at work.

Algorithmic Cascade Selling

Bloomberg MLIV Macro Strategist Michael Ball characterized the pattern succinctly during a similar February 12 flash crash:

"Thursday's AI-disruption driven risk-off tone in equities is starting to broaden out, with metals dropping suddenly on what looks like algo selling - momentum-driven de-risking."

An analysis by Kavout estimated that 79% of the January 30 gold decline stemmed from mechanical and structural factors - margin calls, algorithmic cascades, and portfolio contagion - rather than any fundamental revaluation of gold's worth. The same dynamics are playing out now.

Tech Losses Force Liquidation

When AI and software stocks crash, investors are forced to sell winning positions to cover losses elsewhere. This is liquidity contagion, not a deliberate rotation.

The numbers tell the story. U.S. software stocks lost over $1 trillion in a single week after Anthropic's Claude Cowork release triggered what Wedbush called "Software-mageddon." DeepSeek's upcoming V4 model is threatening the capex moat thesis for American tech giants. When those positions blow up, gold and silver get liquidated to meet margin calls - regardless of their own fundamentals.

Silver's Industrial AI Exposure

Silver has a direct industrial link to AI infrastructure. As the most electrically and thermally conductive metal on the planet, it is a critical material for data centers, high-performance computing, and solar photovoltaics. Analyst Zavier Wong from eToro noted that silver attracts more retail participation than gold, making it disproportionately sensitive to AI-driven sentiment swings.

A Month of Carnage

Date	Event	Gold Move	Silver Move
Jan 28	All-time highs	$5,589/oz	$121+/oz
Jan 30	Warsh Shock	-9.25% (worst since 1983)	-31.4% (worst since 1980)
Feb 2	CME margin hike	Down to $4,404	Down to $71.67
Feb 12	AI flash crash	-3.21% in 30 minutes	-10.73%
Feb 24	Latest selloff	$5,121/oz (-4.1%)	$87.87/oz

The January 30 crash alone deserves its own chapter in financial history. Gold's 9.25% single-day drop was its largest since 1983. Silver's 31.4% plunge was its worst day since the Hunt brothers' silver market collapsed in March 1980. The combined precious metals market lost an estimated $7 trillion from peak to trough in the span of five days, according to Morningstar.

The trigger for that initial crash was the nomination of Kevin Warsh as Federal Reserve Chair, which strengthened the dollar and undermined the "debasement trade" narrative that had been fueling gold's parabolic run.

The CME Made It Worse

The CME Group's decision to raise margins on COMEX gold futures from 6% to 8% and silver futures from 11% to 15% in early February created a self-reinforcing liquidation cycle. Leveraged traders who were already underwater were forced to dump positions at any price, accelerating the decline.

Bruce Ikemizu, Head of the Japan Bullion Market Association, captured the mood: "Having observed this market for 40 years, this level of volatility is unprecedented."

Still Up 75% Year-Over-Year

Here is the part that gets lost in the crash headlines: gold is still up approximately 75.7% year-over-year. On February 24, 2025, gold traded at $2,915. Today it sits at $5,121. Silver is up an even more staggering 171% from $32.35 a year ago.

The structural bull case remains intact. Central banks are purchasing gold at record levels - an estimated 800 tonnes forecast for 2026. U.S. national debt stands at $38.5 trillion and rising. Global de-dollarization continues. Silver industrial demand is surging from data center buildouts and solar PV installations.

The Banks Are Not Backing Down

Bank	Gold Target	Thesis
J.P. Morgan	$6,300/oz	Continued diversification, real-asset outperformance
Deutsche Bank	$6,000/oz	Thematic drivers remain positive
Societe Generale	$6,000/oz	Central bank buying, geopolitical risk

Deutsche Bank's analysis found that in two-thirds of historical cases, gold is higher 6 and 12 months after sharp selloffs. Their team wrote that the selloff "overshot the significance of its ostensible catalysts" and that conditions "do not appear primed for a sustained reversal."

What To Watch

The immediate question is whether gold can defend the $5,000 level that it has been converting from resistance into support over the past two weeks. A break below that level could trigger another wave of algorithmic selling and margin calls.

The deeper question is whether the AI-driven volatility regime is the new normal for precious metals. With algorithmic trading systems, CTA strategies, and cross-asset contagion now dominating price action, the old rules about gold as a quiet safe haven may need rewriting.

For now, the fundamental story has not changed. What has changed is that gold and silver are no longer immune to the chaos emanating from the AI sector - and in a market where Nvidia's daily moves can wipe out trillions in commodity value, that is a risk worth watching.

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