Gold extended losses after its biggest plunge in more than a decade as silver too sank deeper, reversing a record-breaking rally that appeared to have run too far, too fast.<\/p>\n
Spot gold fell as much as 6.3%, while silver plunged as much as 11.9% in Asian trading hours on Monday. The white metal swung sharply, at one point rising more than 3% before resuming a sharp decline. Its intraday loss in the previous session was the steepest on record.<\/p>\n
Read: Coronation called it: Why the fund manager isn\u2019t buying gold stocks<\/p>\n
\u201cThis isn\u2019t over,\u201d said Robert Gottlieb, a former precious metals trader at JPMorgan Chase & Co and now an independent market commentator, adding that a reluctance to take further risks would constrain market liquidity. \u201cWe\u2019ve got to see if it\u2019s going to find support. The bottom line is that the trade was way too crowded.\u201d<\/p>\n
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Precious metals had risen to all-time highs that shocked even seasoned traders. An already-scorching rally accelerated sharply in January, as investors piled into gold and silver on renewed concerns about geopolitical turmoil, currency debasement and the Federal Reserve\u2019s independence. A wave of buying from Chinese speculators added froth to the rally.<\/p>\n
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The extent to which Chinese investors buy the dips will play a key role in determining the direction of the market after Friday\u2019s retreat. While the Shanghai benchmark price extended a fall after the market opened, it was still trading at a premium over the international price. Over the weekend, buyers flocked to the country\u2019s biggest bullion marketplace in Shenzhen to stock up on gold jewelry and bars ahead of the Lunar New Year.<\/p>\n
Read: Gold, silver plunge as reports on Fed nominee boost dollar<\/p>\n
\u201cThe combination of heightened volatility and the proximity of the Lunar New Year will prompt traders to trim positions and reduce risk,\u201d said Zijie Wu, an analyst at Jinrui Futures Co At the same time \u2014 particularly in peak buying season \u2014 the pullback in prices is likely to support retail demand in China, he said.<\/p>\n
China\u2019s domestic markets will be closed for just over a week from February 16 for the Lunar New Year holidays.<\/p>\n
The trigger for Friday\u2019s dramatic selloff was the news that US President Donald Trump would nominate Kevin Warsh to lead the Fed, which sent the dollar higher and undercut sentiment among investors who had bet on Trump\u2019s willingness to let the currency weaken. Traders regard Warsh as the toughest inflation fighter among the final candidates, raising expectations of tighter monetary policy that would underpin the dollar and weaken greenback-priced bullion.<\/p>\n
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Read: What\u2019s driving record gold demand in a $5 000 market?<\/p>\n
But precious metals had already been facing extreme moves, as soaring prices and volatility strained traders\u2019 risk models and balance sheets. A record wave of purchases of call options \u2014 contracts which give holders the right to buy at a pre-determined price \u2014 were \u201cmechanically reinforcing upward price momentum,\u201d Goldman Sachs Group Inc. said in a note, as the sellers of the options hedged their exposure to rising prices by buying more.<\/p>\n
For silver, waves of hot money in China have contributed to domestic supply tightness, but that may reduce as the rout dampens investment demand, Wang Yanqing, an analyst at China Futures Co., said in a note. \u201cOnce the consensus expectation of a one-way rally is broken, shorts\u2019 willingness to make delivery will increase, helping to ease the shortage,\u201d he said.<\/p>\n
Read: Gold retreats as reports on Trump\u2019s Fed nominee boost dollar<\/p>\n
Gold fell 4.6% to $4 671.53 an ounce as of 12:15 p.m. Singapore time. Silver declined 7.4% to $78.86. Platinum and palladium also retreated. The Bloomberg Dollar Spot Index, a gauge of the US currency, was up 0.1% after rising 0.9% in the previous session.<\/p>\n
\u00a9 2026 Bloomberg<\/p>\n
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