The 3 stages of a market meltdown: How investors should approach gold and silver after a historic crash

• Gold and silver suffered historic sell-offs across a two-day period starting last Friday.
• They rallied on Tuesday, but the damage to confidence has been done.
• Detailed below are the three stages of a market meltdown, and what's next for metals investors.

It's easy to take a good thing for granted. Only once it's gone do you realize how special it was. Then you're faced with the indefinite uncertainty of whether you'll ever be able to get it back.

No, I'm not talking about being a modern-day Chicago Bulls fan after growing up during the Michael Jordan era, although I very well could be.

I'm referring instead to the epic run-up in gold (+100%) and silver (+250%) that came to a screeching halt last week. It followed the "don't know what you've got 'til it's gone" playbook to a tee. Let's unpack the three phases:

1. Overconfidence / complacency

Although I wasn't invested in gold or silver during their parabolic ascents throughout 2025, I will cop to becoming numb to documenting their returns. The ease with which I settled into writing "silver is up 250% over the last year" without spitting out my coffee scares me.

My experience mirrors that of those who actually had money in the market. Complacency and euphoric sentiment are hallmarks of retail-investing behavior during unsustainable surges, and this episode was no different.

Day traders, particularly those in China, rode the wave, and trend-following institutions followed. The use of options — which are popular with retail investors — created conditions that made the metals ripe for a squeeze.

No one was fooling themselves into thinking the assets were trading on pure fundamentals. But why would they get out when the gains were flowing so freely, even as overvaluation sirens sounded?

2. Panic

The more an asset goes up into overextended territory, the harder it falls. Silver's massive return gave way to a 36% drop last Friday, after President Trump's nomination of Kevin Warsh as the new Fed chair triggered a sharp reversal of the so-called debasement trade.

For its part, gold dropped 11%. The commodities market was shaken to its core. It was the type of panic-driven incident where it feels like everyone's heading to the exits at once.

When trading stopped for the weekend on Friday evening, investors were left alone with their thoughts for 48 hours, wondering how things could go once futures fired back up on Sunday.

3. Uncertainty

Welcome to phase three, where we currently reside. Trading on Monday was a mixed bag, before a recovery took hold on Tuesday.

People are spooked and feeling uncertain, a sentiment that's being fueled by market pros urging people to not buy the dip, despite the knee-jerk gains.

One technical strategist says she sees eight or nine more weeks of corrective action in metals. Multiple investment chiefs told BI that it's an ill-advised time to buy back in, given the volatility.

Everyone seems to agree that it's best to wait this one out on the sidelines. It'll probably be a while before we loop back around to phase one. But given the unpredictability of the market lately, I wouldn't count anything out.