In short:
The prices of precious metals including gold, silver and palladium have experienced sharp declines in recent days.
The price of palladium, which is used in PCs and cars, has crashed, falling 22 per cent from its peak on December 26.
What's next?
Most analysts are of the view the market volatility is part of a healthy correction in prices following a strong run-up, but some economists believe it may point to weaker economic demand.
The price of palladium, a precious metal widely used in cars, electronics and jewellery, has crashed.
Palladium, known for its rarity, durability and corrosion resistance, is one of the platinum group of metals (PGM), with platinum, rhodium, iridium, osmium and ruthenium.
It hit $US2,023 on December 26, up 82 per cent in the year to date.
Trading at $US1,600 on December 30, it was down 21 per cent from its record high.
Most traders view such a price plunge as a market crash.
The move down in palladium also coincides with a price correction for silver.
A correction is a fall of 10 per cent or more from a recent peak.
The price of gold has also fallen sharply.
The Perth Mint's John O'Donoghue explains what's behind gold's biggest decline in years. (Kirsten Aiken)
China steps into market
Traders told ABC News they believed the price movement in precious metals in the past 72 hours reflected investor profit-taking after a significant run-up in prices over the past 12 months.
"[Precious metals are] very overbought," Marcus Today senior portfolio manager Henry Jennings said.
Henry Jennings says precious metals are overbought. (Supplied: Henry Jennings)
"Margins are being raised to rein in speculators."
Mr Jennings was referring to China asking traders to stump up more collateral for investment in palladium.
China's Guangzhou Futures Exchange announced last week it would adjust the minimum daily opening positions and trading limits for some platinum and palladium futures contracts.
Those changes began yesterday.
Mr Jennings said there were fewer traders in the market, meaning price moves were exacerbated.
Gold, silver pull back
While the price moves in palladium are the most noteworthy, the silver price has also corrected and gold is coming under heavy selling.
Spot gold fell 4.5 per cent to $US4,330.79 an ounce overnight, after hitting a record $US4,549.71 on Friday.
Heavy selling has forced the gold price down after last week's record. (Supplied: Tim Robinson)
Gold has surged about 65 per cent this year.
Gold is a traditional haven asset that performs well during periods of economic and geopolitical uncertainty and can fall in price when the opposite is true.
Silver has rocketed up 182 per cent this year, driven by its critical mineral status, supply shortages and rising industrial and investor demand.
Overnight, silver futures hit a record of $US81.82 before falling back.
Sellers took control after that peak, driving silver down to below Friday's low of $US72,68.
"The move reflects a classic reset following an extended rally, with the sharp gains of recent months amplifying the near-term corrective move, even as supply-side constraints continue to underpin the medium-term outlook into 2026," Moomoo's dealing manager Jimmy Tran said.
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Others were of the view it was all part of a healthy pullback following a "powerful" rally in December.
"The metals pullback in the short term is basically just too much run-up in [the] short term," AMP's deputy chief economist Diana Mousina said.
Meanwhile, RSM Australia economist Devika Shivadekar saw further profit-taking should the environment continue to sour for precious metals investors.
she said."Precious metals could see a pullback if global economic growth reduces safe-haven demand, while rising interest rates and weaker investment sentiment may lead to price declines,"
In other words, if global economic growth picks up, investors may turn to perceived riskier assets to make higher returns.
Comparisons to silver crash
In 1979, the price of silver jumped from $US6.08 per troy ounce on January 1, 1979 to a record high of $US49.45 per troy ounce ($US1.590/g) on January 18, 1980.
That was an increase of 713 per cent.
The price had been driven up by the Hunt brothers in the United States.
The big silver run in 1980 came to an end when the metals exchange changed the margin requirements on the Hunt brothers.
A subsequent steep fall in silver prices led to panic on commodity and futures exchanges and a crash in the price on Thursday, March 27, 1980 — known as Silver Thursday.
Is the silver boom over? (David Taylor)
Despite a change in margin requirements by China leading to a crash in palladium and a correction in silver, Mr Jennings did not see history repeating.
"It's just a risk-off adjustment in thin markets," he said.
Put another way, investors have been spooked by China's policy changes and a large volume of sellers with few buyers.
Capital.com senior financial market analyst Kyle Rodda agreed the big moves in precious metals prices were partly related to thin holiday trading.
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"But the fundamental story for precious metals is a strong one, especially silver which, along with expectations of looser monetary and fiscal policy going forward, is benefiting from a deepening supply deficit, compounded by China's planned export curbs," he said.
"While this may be a blow off top for precious metals, silver and gold remain in uptrends, with the pullback seeing both metals respect technical support."
Something more sinister?
Some analysts, though, remained cautious about the outlook for precious metals.
Ms Shivadekar was concerned the underlying demand for the final products of precious metals could be waning.
"Palladium prices are particularly at risk due to declining automotive demand, i.e. the shift to electric vehicles, and substitution by platinum or rhodium, with geopolitical and economic factors adding to the volatility," she said.
Asked if the collapse in the palladium price could be the proverbial canary in the coal mine for the US tech rally on Wall Street, Mr Jennings said: "Not really."
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