Editor’s Note
This article examines the recent volatility in precious metals markets, questioning their traditional role as safe-haven assets. It includes a vivid trader’s quote on the punishing market swings.
As gold and silver swung from record highs to sharp sell-offs in a matter of weeks, investors were forced to confront an uncomfortable truth — can precious metals still be relied upon as a safe haven in turbulent times?
That is how one Chinese mutual fund manager described the recent roller coaster ride in precious metals — a period of violent swings that has left speculators bruised and industries rattled, forcing a reassessment of gold’s place in the global financial system.
The year 2026 began with a spectacular rally. In January, spot gold and silver prices surged for eight consecutive trading days, climbing to highs of about US$5,600 and US$120 an ounce, respectively — gains of 30% and 67% from the start of the month. But then the rally unravelled just as quickly. On 30 January, prices suffered their worst one-day drop in four decades. Volatility spilled into February, with gold trading at around US$4,867 and silver at US$73 by 6 February.
This frenetic trading pushed the Chicago Board Options Exchange Gold ETF Volatility Index — which reflects expected 30-day swings priced into near-term options — above 44%, a level unseen since the 2008 financial crisis and rivalling the panic of the early Covid outbreak in March 2020.
The turbulence triggered a cross-asset cascade, shaking everything from industrial commodities to regional stock markets and cryptocurrencies, prompting a fundamental question: is gold a speculative token or a true safe haven asset?
a private equity manager said, calling the tremor in precious metal markets a “once in 30 year” event.
Speculative fervour in January was palpable.
recalled a derivatives trader.
Lu Ting, chief China economist at Nomura, said the January rally could no longer be explained by fundamentals and instead reflected speculative sentiment and competing narratives.
A series of moves by US President Donald Trump acted as the catalyst. From a surprise military raid in Venezuela to a criminal investigation into Federal Reserve chairman Jerome Powell and threats of tariffs on European allies, his actions fuelled market uncertainty. One macro analyst at a private fund likened Trump’s presidency to the market buying a call option on gold.
The mania spilled into other commodities. In January, London copper and aluminium futures, along with NYMEX platinum futures, posted peak monthly gains of 15.7%, 12% and 34.7%, respectively.
In response, exchanges in China and the US tried to rein in speculation. The Shanghai Futures Exchange issued 18 market-cooling notices covering dozens of contracts — particularly gold, silver, copper, nickel and alumina — while the Chicago Mercantile Exchange raised margin requirements for gold and silver futures three times.
The bubble burst on 31 January. Gold and silver lost nearly half a month’s gains in a single session. The trigger appeared to be Trump’s nomination of former Fed governor Kevin Warsh, known for his hawkish views, as the next Fed chair.
However, Cheng Tan, founder and research director at GMF Research, argued it was less a Warsh trade than a leverage-normalisation trade. Assets that had risen the most, such as silver, fell the hardest, suggesting a broad profit-taking cascade as long positions were unwound.
A Goldman Sachs report on 3 February noted that much of the volatility occurred while the Shanghai exchange was closed, pointing to Western capital flows as the main driver. A surge of buying in call options on the SPDR Gold Shares ETF — the world’s largest gold ETF — created a precarious setup. As prices approached key strike levels, dealers who had sold the options were forced to buy physical gold to hedge, amplifying the rally.
The violent swings produced what many investors described as an epic squeeze, wiping out profits and, in extreme cases, entire accounts. Unlike the broadly bullish sentiment during the gold rally of October 2025, investors are now sharply divided.
At the Caishikou department store in downtown Beijing, known as the “No 1 Gold Shop in China”, long lines formed at both the investment gold-bar counter and the buyback desk. Some investors rushed to lock in gains, while others saw an opportunity to buy the dip.
For now, many investors believe the long-term logic for holding gold remains intact, driven by a powerful de-dollarisation narrative and persistent geopolitical uncertainty. But the recent chaos stands as a stark warning about the dangers of leveraged speculation in a market increasingly detached from fundamentals.
— Lu Ting, Chief China Economist, Nomura