Recently, the global precious metals market experienced an epic-scale tremor. On February 2nd, a surge in short-term speculative sentiment, possibly driven by some investors "taking profits," triggered a sharp decline in gold. On the last trading day of January, London spot gold plummeted by 7.8%, marking its largest single-day drop since February 1980, while COMEX gold futures in New York crashed by 9.3% in a single day. Concurrently, with the announcement by Trump (Beijing time that evening) nominating Kevin Warsh as the new Federal Reserve Chair, the market faced concentrated selling pressure today. Looking at today's market performance, spot gold briefly fell below $4,500 per ounce, touching as low as $4,440 per ounce, with an intraday decline exceeding 9% and a retreat of over $1,100 from its historical peak of $5,596. Overall, the decline approached 20% in just three trading sessions. However, as of this writing, spot gold has rebounded somewhat to $4,700 per ounce, though the single-day loss remains at 4%.
Tan Yiming, Chief Fixed Income Analyst at TF Securities, indicated that from a news perspective, the "hawkish" expectations brought by the Warsh nomination might be the trigger for gold's sharp fall, but the primary cause is likely fragile market sentiment and short-term investors "cashing in profits." From a technical indicator standpoint, metrics like the Gold ETF Volatility Index (GVZ) and the 14-day Relative Strength Index (RSI) for gold recently broke through previous highs. Furthermore, judging by capital inflows, the long-term allocation force from global central banks has already slowed its purchasing pace; the surge in gold prices this year may be more attributable to price-sensitive investors such as gold ETF and derivative investors, with gold holdings increasingly exhibiting characteristics of excessive "speculation."
Simultaneously, the increase in margin requirements, triggered by high trading congestion in both gold futures and spot markets, served as a direct signal of "official verbal intervention to cool the market." The research team at BOC Securities stated that on January 30th, profit-taking by some earlier investors resonated with forced liquidations from highly leveraged funds due to exchange-mandated margin hikes, forming a cascade. Programmatic trading amplified the decline, leading to a concentrated release of selling pressure, although it did not indicate a panic-driven exodus.
Regarding the appointment of the new Fed Chair, Kevin Warsh, as a former Federal Reserve Governor with a profound monetary policy background, professional reputation, and diverse experience spanning Wall Street and the White House—rather than being a purely political ally—has alleviated market concerns about the Fed's independence. Meanwhile, the hawkish expectations directly pushed up the US Dollar Index and nominal US Treasury yields, increasing the cost for investors to purchase gold and silver, and also challenging the theory that precious metals would replace the US dollar as the global reserve currency.
"From a total value perspective, gold exceeding $5,500 per ounce means the total value of existing gold holdings ($38.2 trillion) has become comparable to the total outstanding US Treasury debt ($38.5 trillion) for the first time since the 1980s. This suggests some loosening in the foundation of the global system established post-Bretton Woods, which is anchored by the US dollar, which in turn is backed by US Treasuries. Whether gold can again surpass $5,500 per ounce will be a crucial watershed for observing market sentiment going forward," stated the Fixed Income Research team at CICC.
How should the subsequent trend of gold be viewed? The research institute of New Lake Futures believes that the core drivers of this gold rally stem from three structural backgrounds: rising global sovereign credit risks, the deepening trend of de-dollarization, and the initiation of a new interest rate cutting cycle. These fundamental logics supporting gold's long-term strength remain unshaken. In the view of Huang Tingli, an analyst at New Lake Futures, major developed economies are currently mired in debt quagmires, with 30-year Treasury term premiums significantly elevated. Simultaneously, de-dollarization has noticeably accelerated since the second half of 2025, making increased holdings of hard assets like gold, which carry no sovereign risk, a more rational defensive choice. Furthermore, from the perspective of Fed policy, although Warsh's election brought adjustments to the market, the impact of tariffs on US prices is more likely to be one-off rather than persistently inflationary; this economic outlook also affords him more room for rate cuts. Market expectations for Fed rate cuts within the year have slightly recovered to two cuts, indicating that market expectations for US monetary policy still lean towards easing.
Zhu Shanying, a senior researcher at CITIC Futures, expressed that gold, as a supra-sovereign currency, remains the preferred asset for hedging against US dollar credit risk. The trend of global central bank gold purchases is expected to persist, and emerging tools like gold-backed stablecoins are expanding the physical gold buying force, collectively providing long-term support for an upward shift in gold's price center. Concurrently, rising expectations of potential constraints under the "Trump 2.0" impact are also a potential factor for future gold strength.
Jiang Shu, Chief Analyst in the gold circle, stated that after experiencing an extreme, sentiment-driven surge triggered by "Trump 2.0," gold has entered a deep correction. This adjustment is not due to technical factors or a liquidity crisis but is the result of a dual effect: receding sentiment and a return to fundamentals. The current market is transitioning from being sentiment-driven to being fundamentally-driven. The core logic is that the marginal impact of uncertainty shocks is weakening, and institutional constraints are materializing (e.g., the Fed Chair appointment is finalized, a government shutdown is avoided), yet the rate-cutting cycle has not ended. Jiang Shu believes that, based on current US economic data, the correction is expected to last until around May, requiring a weekly-chart level technical correction, potentially forming a "spike-shaped" bottoming pattern. Starting in June, with the new Fed Chair taking office and sentiment easing, a secondary rise based on the logic of US dollar interest rate cuts could commence. Gold still possesses the foundation to rebound to its early-year highs or even higher.
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