The gold market continued its deep decline from the previous trading session on February 2nd, with prices probing further lows. Market data showed that spot gold experienced an intraday maximum drop of nearly 10%, hitting a low of $4,402 per ounce, before staging a slight recovery towards the end of the session to close at $4,499.81. This follows a sharp single-day plunge of almost 10% on January 30th, which saw the price decisively break below the critical psychological barrier of $5,000. Since its recent peak, the price of gold has now retreated by a cumulative total exceeding 20%, intensifying market debate over whether the bull market trend has concluded.
The immediate catalyst for this rapid decline in gold prices stems from a swift reversal in market expectations regarding the future policy path of the U.S. Federal Reserve. The nomination of former Governor Warsh, an advocate for "concurrent rate cuts and balance sheet reduction," as a candidate for the new Chair has led investors to anticipate a potential shift towards a more restrictive U.S. monetary policy environment. This change has not only bolstered expectations for a stronger U.S. dollar but has also significantly increased the opportunity cost of holding gold, a non-yielding asset, thereby triggering a concentrated outflow of large-scale profit-taking. Analysts point out that this sudden reversal in policy expectations, combined with previously accumulated excessive buying and crowded long positions, has collectively exacerbated the magnitude and velocity of this downturn.
In the face of this substantial price adjustment, the market's focus has shifted to whether the fundamental logic supporting gold's long-term ascent remains intact. According to statistics from the World Gold Council, global gold demand historically surpassed 5,000 tonnes for the first time in 2025, with investment demand and central bank purchasing activity remaining robust. Not only did UBS Wealth Management raise its gold price target for the first three quarters of 2026 to $6,200 per ounce on February 2nd, citing ongoing concerns about Fed independence, persistent geopolitical tensions, and policy uncertainty as continued supports for gold demand, but Huayuan Securities and CITIC Securities also expressed similarly optimistic views in recent research reports. Huayuan Securities emphasized that policy expectations during the "Trump 2.0" era and the global theme of rate-cut trading would continue to provide upward momentum, while central bank gold buying constitutes a crucial floor of support; CITIC Securities projected that gold prices could reach the $6,000 level in 2026.
A report released by China International Capital Corporation (CICC) on the same day revealed a more profound key shift: when gold prices stood above $5,500, the estimated total value of global above-ground gold stocks was approximately $38.2 trillion, a scale roughly equivalent to the total outstanding stock of U.S. Treasury debt at $38.5 trillion, marking the first such occurrence since the 1980s. The report indicated that this phenomenon of the "two sides of the scale nearing balance for the first time" could signal a loosening in the global monetary credit system centered around the U.S. dollar and Treasury bonds, suggesting that the gold market is entering an "uncharted territory" not experienced for decades, where future price movements will be accompanied by intense contention and high volatility.
So, is the current moment an opportune time to establish positions in gold? From a long-term strategic allocation perspective, the core drivers propelling gold upwards have not vanished. The ongoing process of diversification in global central bank foreign exchange reserves, persistent geopolitical risks, and elevated global debt levels continue to generate steady safe-haven demand. Furthermore, long-term structural doubts regarding confidence in the U.S. dollar provide a foundation for a revaluation of gold's worth. UBS maintains its assessment of gold as "attractive" and holds a bullish stance within global asset allocation. These factors imply that for investors focused on long-term cycles, the current price correction exceeding 20% might be viewed as a valuation reset within a broader uptrend, presenting a window for phased, strategic allocation.
However, from a short-to-medium-term trading viewpoint, immediately "buying the dip" carries significant risks. The market has just undergone a panic-driven sell-off, with volatility at extreme highs and technical patterns yet to be repaired. The factor of changing policy expectations that triggered this decline has not been fully digested by the market. Warsh's nomination and his policy stance still require confirmation through processes like Congressional hearings, and uncertainty remains regarding whether his proposed policy path will ultimately be implemented and its actual effects. A macro and asset allocation research team at a specific bank pointed out that the market will likely remain in a phase of substantial fluctuations in the short term, recommending waiting for volatility to subside before reassessing. Referencing historical precedent, the team noted that corrections of no less than 20% are common occurrences within bull markets, but the baseline area for this adjustment might be around $4,500, with the possibility of a deeper correction should global market volatility amplify.
This research suggests that reconfirmation of the trend requires observing three key signals: first, whether the tight inventory situation in silver eases; second, the actual performance of the U.S. dollar and the persistence of the "de-dollarization" narrative; and third, whether a reversal occurs in major geopolitical uncertainties. Judging by historical volatility patterns, before a new uptrend can be established, the market often needs to undergo a process where volatility recedes from its peak, excessive positioning structures are cleared out, and a new macroeconomic consensus forms—a process that could take several weeks or even months. The CICC report emphasized that to fundamentally end gold's upward trend, it would require a fundamental resolution to three core issues: trust in U.S. Treasuries, confidence in U.S. national credit, and the issue of real asset returns—conditions which are currently not in place. However, this does not imply that gold prices will embark on a straight-line rebound from here.
Is $5,500 per ounce an insurmountable ceiling for gold prices, or the starting point of an entirely new era? Analysis from the CICC report posits that to completely reverse gold's current trend, one would need to see the United States begin to pay a significant price to resolve its "trilemma" of managing low inflation, low interest rates, and maintaining dollar hegemony, thereby restoring market confidence in U.S. Treasuries and the U.S. itself. Regarding the specific magnitude of future gains, the report candidly admitted the difficulty of providing a definitive answer, noting that following the two previous historical breaks above key levels, one instance resulted in a 9% gain, while the other saw a doubling of the price. What is certain, however, is that the gold market has indeed entered an "uncharted territory" unseen for decades, and the existing "old order" is unlikely to allow itself to be easily replaced; consequently, the path ahead will inevitably be marked by intense contention and turbulence.
The essence of this gold bull market has transcended its traditional role as an anti-inflation tool, evolving into a crucial vehicle for pricing the future uncertainty of the global monetary order. As analysis indicates, the old order will not idly watch itself be replaced, and contention inevitably brings turbulence. Against this backdrop, "dollar-cost averaging" is not merely an investment strategy but a rational approach to navigating epochal change—it diminishes the obsession with perfectly timing the bottom and instead emphasizes the importance of continuous participation. When the market widely asks "is it time to buy the dip?", the truly critical question may not be attempting to pinpoint the absolute low, but rather examining one's own risk tolerance and ensuring one remains in the market when the next trend begins. After all, in "uncharted territory," staying in the game is more important than guessing inflection points.
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