Original title: "Gold Drops Over 4%, Silver Plummets 11%, US Stock Market Decline Triggers Algorithmic Selling of Precious Metals?"
Original author: He Hao, Wall Street Journal
On Thursday, the US stock market fell sharply, with the Nasdaq down over 2%. Some traders sold precious metals to offset losses in the stock markets, leading to significant declines in gold, silver, copper, platinum, and palladium prices. The US dollar index rose slightly.
As concerns re-emerged about whether massive investments in artificial intelligence can truly scale, US tech stocks fell. Metal prices suddenly dropped amid suspected algorithmic trading sell-offs, forcing some investors to liquidate their commodity positions, including metals, for liquidity, while some funds shifted toward US Treasury bonds for safety.
Spot gold briefly fell by 4.1%, while silver plummeted by 11%. Copper prices on the London Metal Exchange (LME) dropped by 2.9%. Subsequently, metal prices narrowed some of their losses:
By the end of trading in New York on Thursday, spot gold was down 3.26%, trading at $4918.36 per ounce, maintaining a slight decline before 00:00 Beijing time, mostly steady above $5050, and then experienced a sharp plunge, hitting a daily low of $4878.66. COMEX gold futures fell 3.06%, priced at $4942.50 per ounce.
On Thursday (February 12), at the end of trading in New York, spot silver fell 10.89%, priced at $75.0942 per ounce, holding steady above $82 before 00:00 Beijing time, maintaining a slight decline, and then witnessed a plunge, quickly dropping below $76, and refreshing its daily low to $74.4456 near the US stock market's close. COMEX silver futures fell 10.56%, priced at $75.050 per ounce.
For other significant metals, COMEX copper futures fell 3.65%, priced at $5.7740 per pound, spot platinum dropped 6.19%, and spot palladium fell 5.89%.
What do analysts think?
Regarding the movements in gold and silver on Thursday, industry insiders stated: "Everything happened too quickly, it feels like a risk-off market. During periods of extreme market pressure, even safe-haven assets like gold can be sold off by investors in urgent need of liquidity."
The partial sell-off of gold and silver on Thursday was also due to profit-taking, as the previous rapid rise was somewhat driven by speculative buying.
Some industry insiders pointed out that trading in gold and silver is largely driven by sentiment and momentum. On such days, they tend to perform poorly.
Since 2024, gold and silver have risen sharply, with momentum buying pushing metal prices to new highs. However, this trend abruptly halted on January 29, when gold recorded its largest single-day drop in over a decade, and silver experienced its largest recorded drop. Since then, both metals have oscillated within a narrow range, with increased volatility in the absence of new catalysts.
Some analysts believe that Thursday's sudden drop in gold prices does not imply it is entering a sustained downward trend. However, it does increase the likelihood of continued volatility in the short term. The market has cleared a significant amount of lower liquidity area, and the next movement will depend on price performance around key technical levels.
Media analyses pointed out that despite a slight rebound, overall, metal prices were severely impacted by a sudden decline resembling a "vacuum drop," more akin to systematic strategy sell-offs, i.e., momentum-driven risk-off actions commonly seen when crucial price levels are breached by CTAs (Commodity Trading Advisors).
Despite recent heavy losses, many analysts still expect gold to regain an upward trend, believing that the factors that previously drove the rise remain in place — including geopolitical tensions, doubts about the independence of the Federal Reserve, and a broader trend of shifting from traditional assets (such as currencies and sovereign bonds) to other assets. JPMorgan Private Bank expects gold prices to reach $6000 to $6300 per ounce by the end of the year, and Deutsche Bank and Goldman Sachs also maintain a bullish outlook.
The world's largest silver ETF, iShares Silver Trust, has seen a large volume of 125 strike price call options for May/June trading, while at the same time, investors are selling contracts purchased at high prices earlier, which may further exacerbate selling pressure on silver.
Traders are currently focusing on US economic data, including the crucial CPI data to be released on Friday, to look for clues about the Federal Reserve's interest rate path. Lower borrowing costs typically benefit non-yielding precious metals.
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