Editor’s Note
This article details a sharp reversal in precious metals markets, with gold and silver prices falling precipitously. The sell-off, driven by a rapid unwinding of extreme long positions, has caused significant unease among investors, particularly in Asia.
The gold price has come under significant pressure following its sharpest decline in over a decade. Silver also suffered a substantial blow, rapidly giving up a large portion of its previous gains.
The sudden shift in sentiment is causing unease in financial markets, particularly in Asia. Investors are withdrawing en masse as it becomes clear how extreme long positions had become.
The gold price suffered another significant blow overnight, losing over six percent in value. Silver fell even deeper, with a decline of nearly twelve percent at its low point. This continues the correction in the precious metals market. Already on Friday, silver experienced its largest single-day price drop on record.
According to market experts, it was only a matter of time before a turning point would occur. Demand for precious metals had been exceptionally high in recent months, leading more and more investors to position themselves on the same side of the market.
He points to the fear among traders of taking on risks again. This caution results in a thin market where any fluctuation is immediately amplified.
Just recently, gold and silver reached new record highs. Particularly in January, prices rose sharply as investors fled en masse into precious metals. They sought protection from geopolitical tensions, concerns about a weaker currency, and doubts about US Federal Reserve policy.
Adding to this was a wave of speculation from China. This additional demand drove prices even higher but also made the market vulnerable. When sentiment flipped, many traders wanted to exit the market simultaneously.
The news that Donald Trump is considering appointing Kevin Warsh as the new Chairman of the Federal Reserve accelerated the reversal. Warsh is known as a staunch opponent of inflation. The prospect of his appointment gave the US dollar a boost. This is typically not good news for gold and silver, which benefit from a weaker currency.
Chinese investors remain a crucial factor for the further trajectory of the gold market. Despite the global decline, the gold price in Shanghai is still above the international price. This suggests that demand in China remains robust for the time being.
Ahead of the Chinese New Year, many consumers flocked to gold markets in Shenzhen over the past weekend. They purchased jewelry and gold bars in large quantities. Analysts suspect that the lower prices during this traditional buying period could provide an additional impulse.
Simultaneously, the market unease is leading some traders to reduce their positions. Chinese exchanges will soon close for over a week due to the holidays, which could temporarily paralyze trading.
Other precious metals also came under pressure. Platinum and palladium prices also fell, while the US dollar gained slightly.
