From a core trading logic perspective, the market's optimistic expectations for U.S. monetary easing directly clashed with a reassessment of Federal Reserve leadership expectations, triggered by Trump's nomination of former Fed Governor Kevin Warsh—a staunch supporter of tight monetary policy—to succeed Powell after his term expires in May. This confrontation became the key catalyst for the market's reversal.
As mentioned in previous articles, this expectation directly counters the "sell America" trading logic and has revived the earlier view of buying into and a strengthening U.S. dollar. The shift in expectations behind this trade was precisely the core bullish logic that previously supported the strong unilateral rallies in gold and silver. Now, this logic is gradually unraveling.
Christopher Forbes, Head of Asia Pacific and Middle East at GAIN Capital, explicitly stated that this significant pullback in gold is a typical technical correction following an extreme unilateral rally, not a substantive breakdown of its long-term bullish logic. In essence, it is a "typical sharp decline after an extreme upward surge."
The short-term sharp decline in gold resulted from the combined pressure of multiple bearish factors.
Warsh's nomination became a core driver for the strengthening U.S. dollar. As a firm advocate for tight monetary policy, it heightened market expectations for a more hawkish subsequent Fed policy stance. Previously, the market anticipated that Lael Brainard, representing a stance of easing and inflation tolerance, would become Fed Chair. This shift created a significant expectation gap in the market.
Simultaneously, the U.S. government shutdown transitioned during this period from a substantive shutdown to a nominal one. Although the government is nominally shut down again this time, key agencies have received budgets, meaning there is no actual stoppage.
Furthermore, Trump's statements suggesting a potential agreement with Iran significantly alleviated market geopolitical risk aversion. West Texas Intermediate crude futures fell about 4% on Monday, and the supportive safe-haven buying for gold was consequently weakened. Multiple factors collectively pricked the bubble in this crowded trade.
On the capital front, CME Group raised margin requirements for gold and silver futures. Gold futures margins increased from 6% to 8%, and silver futures margins rose from 11% to 15%. Combined with the substantial profits accumulated during the prior unilateral rally, some investors chose to cash out. The concentrated exodus of profit-taking directly triggered the market decline.
The U.S. dollar index also continued to strengthen in concert, rising approximately 0.8% cumulatively since Thursday. This reduced the attractiveness of dollar-denominated gold for overseas buyers, directly putting downward pressure on the gold price.
Despite the noticeable short-term correction, the price performance of the precious metals market still demonstrates strong resilience. The long-term upward trend has not been altered by this technical correction.
Looking at the performance for 2026 year-to-date, silver prices have risen about 16%, while gold has also recorded a gain of approximately 8%, maintaining positive returns even against the backdrop of the short-term pullback.
Recalling the 2025 market performance, gold and silver experienced record-breaking unilateral rallies, with full-year gains reaching about 65% and 145% respectively. These massive annual increases confirm the long-term strength of the precious metals market and laid the foundation for the 2026 market. The short-term technical correction has not shaken this long-term trend.
The long-term bullish logic for gold is firmly underpinned by multiple fundamental factors including geopolitics, central bank gold purchases, and market capital structure. None of these core supports have undergone substantive changes.
On the geopolitical front, although tensions in the Middle East have recently eased, uncertainties persist globally: The diplomatic standoff between the U.S. and Europe over Greenland's status has disrupted the traditionally stable格局 among Western allies.
The resurgence of global tariff sanction threats exacerbates the risk of world economic "fragmentation." These potential risk points will continue to inject long-term "risk premiums" into the gold price, highlighting its status as the ultimate safe-haven asset.
Regarding central bank gold buying, the global wave of de-dollarization is fully underway, becoming the most disruptive structural support for the gold market. From 2025 to early 2026, central banks in emerging markets like China, India, Poland, and Turkey initiated record-breaking gold purchase programs. For the first time in modern financial history, the proportion of gold reserves surpassed that of U.S. Treasury bonds in several major economies.
Central bank gold demand is characterized by long-term stability, with panic selling being extremely rare. This buying behavior by the "official sector" constructs a solid floor of support for gold prices, acting as a "ballast stone" for the gold market.
In terms of capital and investor structure, the participants in the gold market are continuously expanding, with new capital steadily entering.
At the end of 2025, physical gold ETFs recorded record inflows exceeding $26 billion. These modern financial instruments allow institutional and retail investors to participate in gold investment as conveniently as trading stocks, significantly lowering market entry barriers.
Concurrently, retail demand shows remarkable resilience, with physical demand for gold bars and coins in major consumer countries like India remaining at historically high levels. Younger investors in Western markets are also gradually incorporating gold into diversified digital investment portfolios, viewing it as an essential allocation for hedging market volatility.
After gold prices breached the psychological barrier of $5,000 per ounce, the Fear Of Missing Out (FOMO) effect drove trend-following traders to enter the market, further amplifying the capital momentum in the gold market.
Regarding the subsequent trading trajectory of gold, industry institutions offer clear judgments, with a consensus forming around short-term volatility and long-term bullishness.
Forbes believes that, from a short-term trading perspective, gold prices will continue to fluctuate within a high range, but volatility will significantly increase. The core reason is that the market is in a wait-and-see mode, awaiting clearer signals regarding Warsh's policy orientation. The policy stance of the Fed leadership will serve as crucial guidance for short-term price action.
Long-term, Forbes maintains a bullish outlook for gold over the next 12 months. The core reasoning is that the fundamental drivers supporting gold's rise—geopolitical tensions, massive global debt pressures, and the weakening hegemony of the U.S. dollar—show no clear signs of abating.
If the U.S. dollar enters another weakening phase, or if Warsh's policy stance is confirmed to be dovish, bargain-hunting capital is expected to flow back quickly, pushing gold prices higher. Conversely, if the Fed maintains loose monetary policy while economic growth and inflation continue to diverge, gold prices could potentially retest recent historical highs.
For modern gold traders, gold has long transformed from an ancient store of value into a core hedging instrument in turbulent market environments. This short-term technical correction is merely a phased manifestation of market dynamics under the influence of multiple logics; it has not altered the core logic for its long-term strength. Subsequent trading dynamics centered on Fed policy, geopolitics, and central bank buying will continue to dominate the direction of the gold market.
The recent sharp plunge in gold is full of bottom-fishing opportunities. Why is that? Because the main decline recently occurred primarily during Asian trading hours. As mentioned previously, gold's rallies mainly happen during European and U.S. hours, with trading volume also concentrated there. Recently, during Asian hours, gold experienced large declines on sparse volume. A volume-deficient drop can easily be corrected by capital inflows.
The characteristic of a暴跌行情 is rapid decline, but once the pace of decline slows, the gold price quickly begins to rebound. That is, the trading window for each move often lasts only seconds, as capital can sense the slowdown in the price drop within moments.
Although the time window for each rebound initiation is short, the price experiences many significant declines throughout a single day, presenting multiple opportunities for rebounds.
Technically, spot gold corrected to between the 0.236 and 0.382 Fibonacci retracement levels of this rally and is currently stabilizing near the 0.500 level. Note that areas near the lowest point, being far from the key 0.382 support level yet close to the lower Bollinger Band, offer high safety margins. A similar point occurred at the low on January 30th, which was also far from the key 0.500 support level and near the channel's lower band.
Key price levels are not points where the price will definitely stop, but rather levels that are highly likely to become crucial price pivots. Prices always fluctuate around these pivots. If the price is far from one pivot and接近 a key support level, then from the perspectives of deviation rate and support/resistance, it is highly likely to attract capital favor, generating short-term moves. It also represents a relatively cost-effective entry point for medium to long-term capital allocation.
(Spot Gold Daily Chart, Source: EasyForex) At Beijing Time 20:01, spot gold was quoted at $4,762.64 per ounce.
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