The slide in precious metals showed little sign of easing, with gold prices continuing to fall sharply after last week’s shock driven by shifting expectations around future U.S. monetary policy.
Spot gold dropped a further 4% in early trading to around $4,600 an ounce, following Friday’s 9% plunge. In just a handful of sessions, prices have fallen by roughly 19%. April gold futures also moved lower, trading near $4,666 an ounce.
Silver suffered even heavier losses. Spot silver slid another 12% after collapsing 27% on Friday — its worst single-day performance on record. From last week’s all-time high of $121.64, silver is now down about 40%.
Other precious metals were not spared. Spot platinum sank 9.4% to $1,958.93 an ounce after hitting a record $2,918.80 on January 26, while palladium fell 5.1% to $1,611.86.
The initial trigger for Friday’s dramatic reversal was news that U.S. President Donald Trump plans to nominate Kevin Warsh as the next chair of the Federal Reserve. The announcement boosted the dollar and undermined bullish bets that Trump would tolerate a weaker currency.
Market participants view Warsh as one of the most hawkish candidates on inflation, reinforcing expectations of tighter monetary policy. That outlook has supported the dollar while weighing heavily on dollar-denominated precious metals.
“Warsh’s appointment, while likely the initial trigger, hasn’t accounted for the magnitude of the precious metals slide, with forced liquidations and margin increases having a ripple effect,” said Tim Waterer, chief analyst at KCM Trade. “Warsh’s policy stance has generally been favorable to the dollar and, consequently, negative for gold, given his focus on inflation and his critical views on quantitative easing and the Fed’s excessive balance sheets,” he added.
Despite the turmoil, investors still anticipate at least two interest rate cuts in 2026 — an environment that typically supports non-yielding assets such as gold and silver.
Adding to the pressure, CME Group announced over the weekend that it would raise margin requirements on precious metals futures, with the changes taking effect after Monday’s market close. Higher margins often dampen speculative activity by increasing capital requirements, reducing liquidity and prompting traders to exit positions.
As the sharp reversal brings a record-breaking rally to an abrupt halt, leveraged investors are being forced out of the market, selling other assets to meet margin calls linked to gold and silver positions.
“This is obviously a very aggressive move today following a move similar to Friday’s, because Asian and European markets are only now reacting to what happened on Friday in the US,” said Ilya Spivak, head of global macro at Tastylive. If “the overall picture continues to be favorable for gold, it’s clear that we’ve had some sort of speculative setback here, and there’s some sort of reorganization of portfolios, especially shorter-term ones that are feeling the pinch of these margin calls.”
“The bottom line is that the market was too crowded,” said Robert Gottlieb, a former precious metals trader at JP Morgan and now an independent commentator, adding that investors’ reluctance to take on new risk is likely to constrain liquidity.
“Many buyers already in profit were ready to exit at any time,” explained Jia Zheng, head of trading at Shanghai Soochow Jiuying Investment Management Co, adding that “the sell-off was largely driven by bullion-related exchange-traded funds and leveraged derivatives.”
The extent to which Chinese investors step in to “buy the dip” may shape the next phase of the market. Although Shanghai benchmark prices continued to fall after the open, they remain at a premium to international levels. Over the weekend, buyers reportedly crowded into Shenzhen’s main gold market to purchase jewelry and bullion ahead of the Lunar New Year.
“The combination of high volatility and the upcoming Chinese New Year holiday will prompt traders to reduce positions and reduce risk,” said Zijie Wu, an analyst at Jinrui Futures Co. At the same time, he noted that lower prices during a peak seasonal period could stimulate retail demand in China. Domestic Chinese markets will close for just over a week starting February 16 for the holiday.
Analysts at JP Morgan said that despite the recent turbulence, they still expect the longer-term uptrend to remain intact. “We remain firmly convinced of the bullish outlook for gold over the medium term, based on a clean, structural, and sustained diversification trend, which has yet to develop into a well-established regime of real assets outperforming paper assets,” the bank’s analysts wrote.
“This is a mass exit,” said Ole Sloth Hansen, head of commodity strategy at Saxo Bank A/S, adding that “fundamental support will only return once the sell-off is over and investors can look ahead again.”
Nevertheless, Deutsche Bank analyst Michael Hsueh argued that “the fundamentals have not changed in recent days and the thematic drivers for gold remain positive,” reiterating a price target of $6,000 an ounce.
From a technical perspective, spot gold may face further downside. Reuters technical analyst Wang Tao said prices could retreat toward a range between $4,361 and $4,476 an ounce after failing to hold above the key support level at $4,662.