Despite last week’s violent sell-off, gold, silver and defence shares remain the strongest-performing investment themes of the past year, according to analysis by interactive investor. The question for investors now is whether recent turbulence marks a buying opportunity or a warning sign.

What happened

Until the end of January, gold and silver were surging. Then came a shock reversal. Silver plunged more than 25% in a single day, while gold dropped around 10%, making January 30 one of the most volatile trading days on record for both metals, according to WisdomTree.

Market participants point to a mix of margin calls, rising margin requirements, dollar strength and rapid unwinding of crowded long positions. The sell-off followed the nomination of Kevin Warsh as the next Fed chair, which some investors see as reducing the case for dollar debasement and real-asset hedges.

More about: Gold and Silver Crashed. Here’s What Really Happened and Why It Matters

Still far ahead year on year

Even after the pullback, performance remains striking:

  • Gold trades near $4,930, up from about $2,650 at the start of 2025
  • Silver sits around $86.50, versus just over $30 a year ago
  • Defence stocks continue to outperform, with the Stoxx Europe Aerospace and Defence index up 57% in 2025 and another 15% in early 2026

Those who entered early are still sitting on large gains.

The bull case

Supporters of precious metals argue that structural drivers remain intact. Central banks are buying close to a third of global gold supply, government debt continues to rise, and supply growth from miners is limited. Silver also benefits from strong industrial demand, particularly in electronics and manufacturing, with the market in supply deficit since 2019.

Defence bulls point to long-term government spending commitments, especially among NATO members, alongside investment in new technologies such as AI, drones, hypersonic weapons and space systems. Several fund managers say they have trimmed positions but remain positive on the theme over the medium term.

The bear case

Caution is growing. A Bank of America survey shows 51% of global fund managers now believe gold is overvalued, a record level. After huge gains since 2025, risk-reward looks less attractive and volatility is likely to stay high.

For defence stocks, valuations have expanded rapidly. Some investors warn that regulation and cost controls could limit profit growth even if revenues rise. Others argue the strongest phase of returns may already be behind the sector.

Gold, silver and defence shares are still market leaders, but the environment has shifted. Crowded positioning, sharp price swings and stretched valuations mean future returns are likely to be more volatile and less predictable.

The long-term case has not disappeared. But for investors arriving late, selectivity and risk management now matter far more than momentum.

Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.