The selloff across precious metals showed no signs of stabilizing, with gold and silver extending steep losses after last week’s shock triggered by a shift in expectations for U.S. monetary policy.
Gold in the spot market slid a further 4% in early trading, dropping to around $4,600 an ounce following Friday’s 9% plunge. In just a few trading sessions, gold has shed roughly 19% of its value. April gold futures also declined, trading near $4,666 an ounce.
Silver suffered even more dramatic losses. Spot silver tumbled another 12% after collapsing 27% on Friday — its worst single-day performance on record. From last week’s all-time high of $121.64, the metal is now down approximately 40%.
The downturn extended across the precious metals complex. Spot platinum fell 9.4% to $1,958.93 an ounce after peaking at a record $2,918.80 on January 26, while palladium declined 5.1% to $1,611.86.
Friday’s sharp reversal was sparked by reports that U.S. President Donald Trump intends to nominate Kevin Warsh as the next chair of the Federal Reserve. The announcement sent the dollar higher and undermined investor confidence that the administration would tolerate a weaker U.S. currency.
Market participants widely view Warsh as one of the most aggressive inflation fighters among potential Fed leaders, reinforcing expectations of a tighter monetary stance. That outlook has bolstered the dollar while weighing heavily on dollar-priced 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 expect at least two interest rate cuts in 2026, a backdrop that historically supports non-yielding assets such as gold and silver.
Further pressure came after CME Group announced over the weekend that it would raise margin requirements on precious metals futures, effective after Monday’s market close. Higher margin thresholds tend to reduce speculative participation, tighten liquidity and push traders to unwind positions.
As a historic rally comes to an abrupt end, leveraged investors are being forced out, selling other assets to meet margin calls tied to gold and silver holdings.
“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, noting that investor reluctance to take on fresh risk is likely to constrain liquidity.
“Many buyers already in profit were ready to exit at any time,” said 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.”
Attention is now turning to China, where the willingness of investors to step in and “buy the dip” could shape the market’s next move. Although Shanghai benchmark prices continued to slide after the open, they remain at a premium to international prices. Over the weekend, buyers 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 falling prices during a peak seasonal period could support retail demand in China. Domestic markets will close for just over a week starting February 16.
Analysts at JP Morgan said that despite the recent volatility, the longer-term bullish trend remains 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 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.”
Still, 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 target of $6,000 an ounce.
From a technical perspective, further downside may be possible. Reuters technical analyst Wang Tao said spot gold could retreat into a range between $4,361 and $4,476 an ounce after failing to hold above the key support level at $4,662.
