Gold and silver prices continued to decline sharply on February 2nd, with a batch of stocks in the precious metals sector hitting limit down.
Precious metals futures opened significantly lower in the domestic market. At the time of writing, Shanghai silver, platinum, and palladium contracts were limit down, while Shanghai gold had fallen over 11%.
Furthermore, at the time of writing, spot London gold was down 9.26%, trading at $4,441.85 per ounce; spot London silver was down 14.7%, trading at $72.723 per ounce.
It is worth noting that on January 30th, the spot London gold price had fallen over 12% at one point, hitting a low of $4,682 per ounce. By the close that day, spot London gold was down 9.25% at $4,880 per ounce. Spot London silver had plummeted over 36% intraday, touching a low of $74.28 per ounce. It closed the day down 26.42% at $85.259 per ounce.
Additionally, on February 2nd, the SDIC Essence Fund Silver Futures Securities Investment Fund (LOF) resumed trading at 10:30 AM and hit limit down. At the time of writing, the fund's secondary market price was 4.722 yuan, representing a premium rate of 43.8%.
The Shanghai Gold Exchange issued an announcement on the morning of February 2nd, adjusting the trading margin requirements and daily price fluctuation limits for its silver deferred settlement (Ag(T+D)) contracts. If a one-sided market condition occurred in the Ag(T+D) contract on February 2nd, the margin level for that contract would be increased from 20% to 26% starting from the closing settlement, and the daily price limit would be adjusted from 19% to 25% for the next trading day.
In the A-share market, the precious metals sector continued to trend lower. A number of stocks, including Shandong Gold, Zhongjin Gold, Shanjin International, Chifeng Gold, Hunan Gold, Hunan Silver, Western Gold, Hengbang Shares, Sichuan Gold, and Zhaojin Gold, all hit limit down.
Notably, several companies recently issued announcements warning of potential risks arising from fluctuations in gold and silver prices.
Among them, Hunan Gold stated that the rise in its share price was related to the increase in the price of its main product, gold, but uncertainty remains regarding whether the market price of its gold products can continue to rise or maintain high levels.
Zhaojin Gold indicated that gold prices are influenced by various factors including market supply and demand, global macroeconomic conditions and expectations, and monetary policy. The prices of its gold bullion and gold concentrate products are significantly affected by gold price fluctuations; substantial future volatility in gold prices could materially impact the company's operating performance.
Sichuan Gold also mentioned that the price of its gold concentrate product is greatly affected by gold price volatility, and significant future fluctuations in gold prices could have a major impact on its operating performance.
Why are gold and silver prices correcting? Qu Rui, Senior Associate Director of the Research and Development Department at Oriental Jincheng, discussed two main reasons. First, the nomination of former Fed Governor Warsh by Trump, whose policy stance favoring "interest rate cuts + balance sheet reduction" boosted the US dollar and raised market concerns about future liquidity. Second, the previous rapid ascent of international gold prices, combined with severely overbought market conditions, triggered profit-taking and capital outflows.
An analysis from CITIC Securities Research Report points to three reasons for the recent violent fluctuations in international precious metal prices, with the core factor being the Fed Chair nomination shattering market "dovish" expectations.
CITIC Securities stated, first, a shift in Fed policy expectations triggered US dollar strength: the US President's nomination of the "hawkish" figure Warsh for Fed Chair, with his policy inclination towards "balance sheet reduction + rate cuts," broke market "dovish" expectations, rapidly pushing the US dollar index higher. This directly pressured the prices of dollar-denominated precious metals, reducing their attractiveness. Furthermore, weakened market expectations for a Fed rate cut in March further reinforced short-term bearish sentiment.
Second, short-term profit-taking and leveraged fund stampede: Precious metal prices surged rapidly in January 2026, technically entering severely overbought territory (gold's RSI index hit a 40-year peak). Speculative funds that entered early had strong profit-taking demands, compounded by programmatic stop-loss triggers from leveraged funds, initiating a chain reaction of selling.
Third, silver's strong speculative nature leads to more violent fluctuations: Silver, possessing both financial and industrial attributes, experiences more pronounced volatility. On one hand, demand from sectors like photovoltaics, new energy vehicles, and AI data centers is exploding, driving inventories to ten-year lows. On the other hand, high prices are stimulating industrial technological substitution (e.g., copper for silver), raising concerns about demand sustainability and intensifying price swings. Simultaneously, the silver market is smaller than gold's, is not a traditional asset allocation vehicle for funds, and attracts more speculative capital, particularly leveraged funds, further exacerbating its price volatility.
Regarding the future trend of gold prices, in Qu Rui's view, medium to long-term support for gold remains. If Warsh's aggressive balance sheet reduction leads to economic weakness and rising unemployment, market safe-haven demand may return. Concurrently, the market's method of pricing global risks is evolving; pricing is no longer confined to single conflicts or crises but increasingly treats geopolitical risks, US dollar credit risk, US debt sustainability risk, etc., as persistent structural variables, creating sustained risk premiums. Therefore, the logic for gold's upward trend continues and lacks conditions for a reversal, though short-term price volatility requires attention.
As for silver, Qu Rui indicated that looking ahead, silver is likely to experience further catch-up declines in the short term, primarily because significant price corrections could trigger stampedes leading to additional falls. However, medium to long-term, silver's precious metal attributes, coupled with its industrial properties, are expected to support a price recovery.
A research report from Shenyin & Wanguo Futures mentioned that, overall, short-term volatility in the precious metals market may intensify, and it advises investors to adopt a wait-and-see approach for now. After a sufficient market adjustment, gold is expected to resume a steady upward trajectory within the year, while silver, influenced by industrial demand and inventory factors, is likely to exhibit greater overall volatility than gold.
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