Author：Currency Explorer
On Thursday, financial markets experienced a sudden sell-off, with gold prices plummeting as some traders sold metals to recoup losses in the stock market. Silver and copper also fell sharply.
U.S. tech stocks fell as renewed concerns arose about whether massive investments in AI could deliver substantial returns. Some investors were forced to liquidate their commodity positions (including metals) to replenish liquidity, while others turned to U.S. Treasuries for safe haven.
International spot gold prices plunged in US trading, falling nearly $200 within 30 minutes to a low of $4878.37 per ounce, before closing down more than 3%. Spot silver also plummeted nearly $9 during the day, closing at $75.26 per ounce, a daily drop of 10.64%. Copper prices on the London Metal Exchange fell as much as 2.9%.
“Everything happened so fast, this is clearly a ‘risk-averse’ market,” said Nicky Shiels of MKSPAMP SA. She added,When the market is under extreme pressure, even safe-haven assets like gold can be sold off by investors who desperately need liquidity.
Thursday's sell-off in gold and silver also stemmed fromProfit taking—The recent surge in metal prices has been partly driven by speculative buying.
“Gold and silver trading is highly dependent on market sentiment and momentum. On days like these, it’s hard for them to remain unaffected,” said Ole Hansen, commodities strategist at Saxo Bank.
The strong rally in gold and silver since 2024 accelerated last month, with momentum buying driving prices to new highs. However, the rally came to an abrupt halt on January 29, with gold experiencing its biggest single-day drop in over a decade and silver suffering its most devastating plunge in history.
Subsequently, in the absence of new catalytic factors, the two metals fluctuated dramatically within a narrow range.
"Given the increased volatility previously, many people are likely to set stop-loss orders below $5,000 or above $5,100," said Fawad Razaqzada, market analyst at City Index and FOREX.com.
As prices fell, stop-loss orders were triggered below $5,000, which caused a chain reaction, resulting in a sharp drop in prices in a short period of time.
However, Fawad Razaqzada believes that Thursday's sudden drop in gold prices "This does not mean that gold will enter a sustained downward trend."However, the possibility of increased short-term volatility has risen. The market has already absorbed a large amount of downward liquidity."The next move will depend on how the price performs at key technical levels..
Michael Ball, a macro strategist at Bloomberg MLIV, said that risk aversion in stocks triggered by AI concerns is spreading on Thursday, with metals experiencing a sudden sell-off, which looks like...Algorithmic tradingDominant. He further explained, "The overall 'cliff-like' drop in metal prices is more like..."Systematic strategy for closing positionsThis refers to the momentum-based risk-averse operations commonly employed by CTAs (Commodity Trading Advisors) after key price levels are breached.
The metals sector suffered a severe setback, which is more like a systematic strategy liquidation – a momentum-based risk-taking operation commonly seen by CTAs (Commodity Trading Advisors) after key price levels are breached.
Despite recent setbacksSeveral banks still expect gold to resume its upward trend.The core factors that previously drove up gold prices remain unchanged: including geopolitical tensions, questions about the Federal Reserve's independence, and the global trend of funds shifting from traditional assets such as currencies and sovereign bonds. JPMorgan Private Bank predicts that gold prices will reach $6,000-$6,300 per ounce by the end of the year, while Deutsche Bank and Goldman Sachs also maintain a bullish view.
In the world's largest silver ETF, iShares Silver Trust, a large number of call options with a strike price of $125/ounce expiring in May-June have been traded. Investors recently bought at high prices and then closed out their positions, which has further exacerbated the selling pressure on silver.
Traders are focusing on Friday's release of U.S. core CPI and other economic data for clues about the Federal Reserve's interest rate path.
The market expects overall CPI to fall from 2.7% to 2.5%, and possibly even as low as 2.4%. Peter Grant, vice president and senior metals strategist at Zaner Metals, said this could trigger some bets on interest rate cuts, thus supporting gold.
