Original author: He Hao, Wall Street Insights
U.S. stocks plunged on Thursday, with the Nasdaq falling more than 2%. Some traders sold precious metals to offset losses in the stock market, causing gold, silver, copper, platinum, and palladium to decline sharply. The U.S. dollar index rose slightly.
U.S. tech stocks fell amid renewed concerns about whether massive investments in artificial intelligence can truly be implemented on a large scale. Metal prices suddenly plummeted following suspected algorithmic trading sell-offs, forcing some investors to exit commodity positions, including metals, for liquidity, while some funds turned to U.S. Treasury bonds for safety.
Spot gold fell as much as 4.1%, while silver plummeted 11%. Copper prices on the London Metal Exchange (LME) fell 2.9%. Metal prices subsequently recovered some of their losses.
In late New York trading on Thursday, spot gold fell 3.26% to $4,918.36 per ounce. It maintained a slight decline until midnight Beijing time, mainly holding above $5,050, before experiencing a sharp drop, hitting a daily low of $4,878.66. COMEX gold futures fell 3.06% to $4,942.50 per ounce.
On Thursday (February 12), spot silver fell 10.89% to $75.0942 per ounce in late New York trading. Before midnight Beijing time, it held steady above $82, maintaining a slight downward trend, before experiencing a sharp drop, quickly falling below $76 and hitting a daily low of $74.4456 near the US stock market close. COMEX silver futures fell 10.56% to $75.050 per ounce.
In other major metals, COMEX copper futures fell 3.65% to $5.7740 per pound, spot platinum fell 6.19%, and spot palladium fell 5.89%.
What do analysts think?
Regarding Thursday's gold and silver price movements, industry insiders commented, "It all happened so fast; it felt like a risk-off move. In times of extreme market stress, even safe-haven assets like gold can be sold off by investors desperately needing liquidity."
Thursday's sell-off in gold and silver also stemmed from profit-taking, as the previous sharp rise was partly driven by speculative buying.
Industry insiders point out that trading in gold and silver is still largely driven by sentiment and momentum. On days like these, they will struggle.
Since 2024, gold and silver have seen a strong rally, with momentum buying driving prices to new highs. However, this upward trend came to an abrupt halt on January 29th, when gold recorded its biggest single-day drop in over a decade, and silver experienced its largest decline on record. Since then, lacking new catalysts, both metals have traded within a narrow range, with increased volatility.
Some analysts believe that Thursday's sudden drop in gold prices does not necessarily mean it is about to enter a sustained downtrend. However, it does increase the likelihood of continued volatility in the short term. The market has cleared a large area of liquidity below, and the next move will depend on how prices perform near key technical levels.
Media analysis points out that although there was a slight rebound, overall, metal prices were hit hard in a sudden drop that resembled a "vacuum fall," which was more like a systematic strategy of selling off, that is, a momentum-driven risk-averse operation commonly seen by CTA (Commodity Trading Advisor) groups when key price levels are breached.
Despite recent setbacks, many analysts still expect gold to resume its upward trend, believing that the factors that previously drove the price increase remain intact—including geopolitical tensions, questions about the Federal Reserve's independence, and a broader trend of shifting from traditional assets such as currencies and sovereign bonds to other assets. JPMorgan Private Bank predicts that gold prices will reach $6,000 to $6,300 per ounce by the end of the year, while Deutsche Bank and Goldman Sachs also maintain a bullish view.
The world's largest silver ETF, iShares Silver Trust, saw a surge in May/June 125 strike price call option trading, while investors sold contracts they had previously bought at higher prices, potentially exacerbating the selling pressure on silver.
Traders are currently focused on U.S. economic data, including Friday's key CPI figures, for clues about the Federal Reserve's interest rate path. Lower borrowing costs typically benefit precious metals that do not generate interest income.
