Precious metals markets experienced significant turbulence over the past week. According to Wind data, the intraday price spread for spot gold in London consistently hovered around $300 per ounce, prompting a clear shift in capital strategy towards rapid trading. Silver underwent 11 sharp fluctuations exceeding 5% in the past seven trading days, with monthly volatility surpassing 100%. Previously popular gold ETFs saw substantial redemptions, with seven domestic ETFs tracking the SGE Gold 9999 Index shrinking by a combined CNY 22 billion during the week. Multiple institutional research reports have issued warnings, suggesting that gold and other precious metals are entering a consolidation phase in the coming weeks. Liu Rui, Vice President and Chief Investment Officer of BlackRock CCB Wealth Management, emphasized at BlackRock's China 2026 Investment Outlook event that investors must understand their own goals and risk tolerance, noting that buying gold now requires enduring considerable short-term volatility. Liu analyzed that while gold holds long-term allocation value, investors should be wary of high volatility caused by crowded trades in the near term. Gold surged 65% in 2025 and gained over 30% in less than a month by January 2026, far exceeding historical averages. This rapid ascent attracted substantial retail, ETF, and physical buying, fueling excessive market exuberance. Any correction could easily trigger a stampede of selling. The sharp price swings and tighter regulations reflect a shift in capital logic. Safe-haven funds that previously flowed into gold ETFs are rapidly exiting, leading to a swift contraction in ETF规模. Wind data shows that, for the week ending February 7, the seven ETFs linked to the SGE Gold 9999 Index saw their规模 shrink by over CNY 22 billion, while six gold stock ETFs decreased by CNY 8.45 billion. In speculative positioning, according to CFTC data, net long positions in COMEX gold futures held by speculators fell by 27,983 contracts to 93,438 contracts for the week ending February 3. CICC analysis indicates that current speculative net longs are about 28% lower than when the Fed resumed rate cuts last September. Macroeconomic factors suggest that a turning point towards monetary easing in the U.S. is unlikely this year, and current market pricing for rate cuts is not optimistic. A precious metals trader noted that the shift in capital patterns signals a change in market sentiment. Gold has transitioned from a traditional safe-haven asset to a high-volatility risk asset. As volatility increases, short-term trading with quick entries and exits has become the dominant strategy, further amplifying market fluctuations. Silver market volatility has been even more extreme than gold's. On Thursday, February 5, spot silver plunged 19%, erasing all its gains for the year. Prices fell to $64 per ounce during the week, nearly halving from the recent historic high of $121.65. In response to extreme volatility, the CME Group has raised margin requirements for silver futures seven times since December 2025. The latest adjustment on February 5 increased initial margins for non-high-risk accounts from 15% to 18% of contract value, and for high-risk accounts from 16.5% to 19.8%. The trader mentioned that historical experience shows密集 margin hikes by exchanges often signal critical market turning points, similar to signals seen before the 1980 Hunt Brothers squeeze and the 2011 silver crash. The CME's rare seven consecutive increases have sparked widespread debate on whether precious metals have peaked. Facing intense market swings, foreign institutions have lowered short-term expectations and warned investors of correction risks. Fawad Razaqzada, Senior Analyst at Gain Capital, believes it is premature to be bullish on gold in the short term. After such a severe sell-off, determining a solid bottom for gold prices is challenging. Market sentiment has reset and is unlikely to recover linearly, with potential for another round of selling. Regarding silver, Nicky Shiels, Head of Research and Metals Strategy at MKS PAMP, expects silver to digest previous excessive gains over the coming weeks rather than rebound immediately, with prices potentially testing $60 per ounce. Guo Shaoyu, Senior Multi-Asset Investment Manager at Pictet Asset Management, noted that gold has traditionally been viewed as an asset providing stable, predictable returns, similar to bonds. However, recent market trends show gold's correlation with risk assets like equities is strengthening. Concentrated short-term inflows from retail investors have significantly altered the investment characteristics of gold and even silver. Statistics indicate that retail investors contributed approximately $23 billion of the $39 billion increase in gold market value over the past year. Based on this assessment, Guo stated that gold remains important in their asset allocation, but exposure will be adjusted accordingly. The current strategy is to wait for speculative sentiment to subside and prices to realign with fundamentals before making further allocations. Long-term fundamental support for gold remains solid. Guo believes gold's scarcity and limited supply, coupled with ongoing central bank purchases, are enduring trends. Latest data from the State Administration of Foreign Exchange shows China's official gold reserves reached 74.19 million ounces by the end of January 2026, an increase of 40,000 ounces from December 2025, marking the 15th consecutive month of accumulation by the People's Bank of China. Liu Rui also affirmed that the long-term allocation logic for gold remains robust, supported by structural factors such as deglobalization, a weaker U.S. dollar, and sustained central bank buying. These drivers, arising from phased global developments, are largely irreversible.
Comments