Precious metals, which had been soaring recently, experienced a catastrophic plunge. As of January 31st's close, London gold was quoted at $4,865.35 per ounce, down 9.45%. This marks the largest single-day decline in nearly 40 years.
Other precious metals were not spared either. Silver closed down 26.77% at $84.7 per ounce, also recording its largest single-day drop since early 1980. Furthermore, spot platinum plummeted approximately 18%, and spot palladium plunged about 15%.
On the morning of January 31st, a reporter visited Shenzhen's Shuibei market, a core hub for domestic gold and jewelry trading, posing as a consumer to witness the market's trading reality following the gold price crash. Regarding the recent drop in gold prices, one material supplier stated they would simply lock in their positions and refrain from selling.
"The raw material is hard to obtain right now," explained one merchant regarding suppliers' reluctance to sell. One reason is the current sharp decline in gold prices, and another is the approaching Spring Festival, as suppliers have received too many orders and cannot process them.
"The day before yesterday (January 29th), the gold price was over 1,200 yuan per gram; today it's 1,126.5 yuan," said a merchant specializing in gold bars during the visit to Shuibei. The current price for gold bars is the market price plus a 15-yuan processing fee, making the final cost 1,141.5 yuan per gram, a drop of over 50 yuan compared to the price two days prior. When asked if the price would change again today (January 31st), the merchant indicated it would wait until next Monday, stating, "It's the weekend today; the gold price won't change."
Amid the falling gold prices, some merchants in Shenzhen's Shuibei market reported that their gold bars are currently out of stock because "the raw material is not easy to get."
Merchant Zhang Li (a pseudonym) explained that with the recent sharp drop in gold prices, when she sells gold bars to customers, she must first order a bar from a material supplier and lock in the price to secure her purchase cost and avoid losses.
"Once you buy, I need to immediately place the order and fix the price," said the merchant, adding that suppliers haven't been selling much material recently. "Since yesterday (January 30th), they have barely been releasing any material."
Interviews conducted posing as a consumer revealed that the "material suppliers" mentioned by merchants are those who buy and sell gold to Shuibei merchants. These suppliers typically purchase gold at locked prices from the Shanghai Gold Exchange, but starting yesterday, they have gradually reduced their material sales.
"There are two main reasons," Zhang Li explained. "First, with the recent sharp gold price drop, suppliers are hesitant to gamble; if they acquired it at high prices, they would incur losses. Second, with the New Year approaching, suppliers have received too many orders and cannot handle them themselves." For example, if a supplier locked in a price of 1,200 yuan per gram on the Shanghai Gold Exchange, but the market price falls to 1,195 yuan, the supplier would lose 5 yuan per gram.
"Those who frequently speculate on market trends go bankrupt very quickly nowadays; many merchants have encountered problems," Zhang Li stated.
"Silver is being sold at a fixed price, but gold material is hardly being released anymore," said one material supplier. Suppliers also have costs; encountering such a sharply falling market, they basically stop selling, and even replenishing inventory is difficult. "We'll just treat these days as a break."
"With gold prices fluctuating so wildly, it's uncertain if any merchant would dare sell you gold bars. For instance, yesterday's market showed a 'V-shaped' trend; I had just issued a sales slip to a customer when the gold price rose. There was nothing I could do. These days, selling gold bars can only mean adding a bit more to the processing fee," commented one merchant.
"We won't be selling any goods when it drops like this," stated one gold material supplier.
Against the backdrop of difficult-to-obtain gold material, some merchants said gold bars are now available on a "first-come, first-served" basis. Regarding whether anyone is currently "buying the dip," some merchants mentioned that people were still buying gold bars yesterday. "They are mainly optimistic about the long-term gold price."
At 3 AM on January 31st, discussions were ongoing in many gold trading chat groups. Some complained about making money on January 29th only to lose it the next day.
The sudden market turmoil left many bewildered, and even investors who had taken short positions were not spared. Li Liang (a pseudonym) was one of them. Faced with a reporter's question, Li Liang remained silent for a long time before saying, "What is there to say? Chasing the short side led to a margin call."
"When it was rising, I was afraid it would fall; when it started falling, I didn't short it in time. The platform I use offers 2000x leverage. Actually, it shouldn't have led to a margin call, but when it fell, I placed a couple of losing orders and didn't stop, thinking I could still manage it. I was too emotional. I opened a few more positions when it was around $4,700 per ounce, but then the market rebounded sharply back to around $4,900. While I was still hesitating, I got wiped out. I don't feel like doing anything now; who knows what Monday will bring?" Li Liang said.
Some investors in the groups lamented, "Got on board just two days ago and got caught," and "Made 8,000 yuan from last year until now, but lost it all in this move." It was noted that many groups were debating whether gold would continue to fall. Some planned to buy the dip, while others intended to "exit" when the timing was right.
Furthermore, many investors who purchased gold accumulation plans from banks were also affected. "Lost 80,000 yuan in one day," said one investor, explaining that she bought some gold around New Year's Day, sold part later without making much profit, and then invested more. A screenshot of her gold account showed she currently held 675 grams of gold. "Yesterday, when the floating profit was 55,000 yuan, I thought I'd wait until it reached 60,000 to sell. But then in the evening, there was a 'waterfall,' and the floating profit dropped to 30,000 yuan. Today, the floating profit vanished entirely, and I'm now down 40,000 yuan."
Against the backdrop of simmering geopolitical uncertainty and rising market expectations for Federal Reserve rate cuts within the year, safe-haven funds have flooded into the gold and silver markets since the start of the year.
The spot gold price accumulated a gain of about 13% in January. However, on the last trading day of January, gold fell by over 11% at one point. Concurrently, the US Dollar Index surged 0.9%, the 10-year US Treasury yield rose to 4.24%, and the S&P 500 index dipped slightly by 0.4%.
Huaan Fund pointed out that the policy expectations associated with the new Fed Chair nominee, perceived as "hawkish," became a direct factor affecting gold trading. On January 30th, Kevin Warsh was nominated by the former president for the position of Fed Chair. Compared to other candidates, he holds a relatively "hawkish" stance: advocating for balance sheet reduction, emphasizing monetary discipline, and being cautious about easing policies. This changed market expectations regarding the Fed's future policy path. Previously, the market had bet on candidates like Hassett or Reed, who might prioritize coordinating with fiscal policy and implement significant rate cuts. Warsh's nomination triggered a repricing of tightening expectations, leading to a short-term correction in trading logic.
Ye Qianning, a precious metals researcher at GF Futures, stated that based on the attitudes of the previous Fed Chair candidates, Warsh's support for a monetary policy combining "rate cuts + balance sheet reduction" is relatively more "hawkish." In the current context where markets worry about the Fed's independence being compromised, his former role as a Fed governor facilitates internal communication, and his lack of blind迎合 (catering) to the former administration's push for rapid rate cuts is likely to gain market recognition. Regarding the specific market impact, the key if Warsh takes office lies in whether, around the time of the US mid-term elections in the second half of the year, he can effectively balance employment and inflation issues through a "rate cuts + balance sheet reduction" policy, thereby boosting dollar-denominated assets and suppressing demand for precious metals. However, if US economic downward pressure persists, it would benefit assets like gold due to their safe-haven attributes.
Zeng Gang, Chief Expert and Director of the Shanghai Finance and Development Laboratory, stated that Warsh's nomination impacts the market across multiple dimensions. First, policy expectation repricing: the market widely interprets Warsh as a relatively "hawkish," anti-inflation discipline emphasizing "establishment" candidate. This pushed the US Dollar Index and US Treasury yields higher in the short term, pressured valuations of risk assets, and caused historic massive volatility and a "stampede-like" correction in gold and silver. Second, rising uncertainty premium: the nomination requires Senate confirmation; debates during this process regarding Fed independence and its relationship with the White House could amplify market volatility. Mizuho Securities and Carson Group both noted that his "balance sheet replacement" ideas might cause阶段性 (periodic) turbulence.
The Federal Open Market Committee (FOMC) operates on a collective decision-making mechanism where the Chair has only one vote, and any policy action requires majority committee approval, limiting Warsh's actual power to steer monetary policy shifts. Furthermore, while Warsh advocated for prompt balance sheet reduction post-crisis and opposed excessive quantitative easing, he is not unconditionally opposed to rate cuts but emphasizes being "data-driven" and maintaining a "cautious pace." If subsequent economic data weakens or his communication leans dovish, the market might still correct the current overly "hawkish" pricing. Short-term, it appears favorable for the US dollar and negative for gold; long-term, it depends on the interplay between actual policy execution and economic fundamentals.
From a trading perspective, Huaan Fund noted that gold's implied volatility saw a significant spike in January, indicating accumulating risk factors. Both the at-the-money implied volatility for the Shanghai gold main contract (SHF_AUIV) and the CBOE Gold ETF Volatility Index (GVZ) exceeded 40, signaling increased gold price volatility. In a high-volatility environment, market irrational sentiment can easily be amplified. Especially given gold's monthly gain一度 (at one point) reaching 20% in January, the momentum for profit-taking has strengthened.
With gold recording its largest historical amplitude, the market focus is on its future trajectory.
Zhang Juntao, Senior FX and Commodities Researcher at Industrial Research, stated that a technical correction following short-term overbought conditions might lead to a 3 to 6-month adjustment period.
Zeng Gang indicated that in the short term, after an "epic surge" at the beginning of 2026, gold and silver experienced a sharp plunge. Silver's gains一度 (at one point) approached 50% in January, with an intra-month amplitude of 40%, while gold corrected after hitting a record high for the 53rd time. This rollercoaster ride stemmed from the叠加 (overlay) of three factors: excessive prior gains accumulating profitable positions, Warsh's nomination strengthening "hawkish" expectations triggering long position liquidations, and excessive disparity between silver futures and spot prices creating "mean reversion" pressure. Some market institutions pointed out that gold volatility is already above the 90th percentile since 2008, significantly increasing the risk of short-term fluctuations and corrections.
Simultaneously, Zeng Gang stated that from a medium to long-term perspective, institutional consensus leans towards a "continuation of the moderate bull market but with收敛 (converging/lesser) gains." Supporting logic includes: the improvement in the opportunity cost of non-yielding assets from the Fed's rate-cutting cycle, continued central bank gold purchases (demand reached a record 5,002 tons in 2025), and geopolitical/"de-dollarization" narratives; silver additionally benefits from industrial demand and a supply deficit for the fifth consecutive year (approximately 95 million ounces). Therefore, it resembles "high volatility within a bull market" rather than necessarily a trend reversal, but it will transition from a unilateral surge into a stage of "wide fluctuations and consolidation."
Ye Qianning believes that the latest report from the World Gold Council shows global gold demand exceeded 5,000 tons for the first time in 2025, reaching a record high of 5,002 tons. Investment demand replaced jewelry consumption as the largest source of demand, with retail and institutional investors becoming the dominant purchasing forces. On one hand, central bank purchasing slowed by one-fifth to 863 tons, lower than the 2022-2024 levels but still relatively high. On the other hand, investment demand surged 84% to a record 2,175 tons, with gold ETF holdings increasing by 801 tons, ending four consecutive years of outflows, and bar and coin purchases jumping 16% to 1,374 tons, a 12-year high. Medium to long-term, although Fed monetary policy is tending towards caution short-term, it hasn't altered the long-term expectation for easing or concerns about trade frictions and geopolitical risks. Global mainstream institutions will continue increasing their allocation to precious metals against the "de-dollarization" backdrop, central bank purchasing demand is also expected to remain strong, both providing support for prices, suggesting medium to long-term upside potential remains.
Comments