Original Article Title: "Gold Plunges Over 4%, Silver Crashes 11%, Stock Market Meltdown Triggers Algorithmic Precious Metals Sell-off?"
Original Article Author: He Hao, Wall Street News

On Thursday, the U.S. stock market experienced a sharp decline, with the Nasdaq falling over 2%. Some traders sold off precious metals to offset losses in the stock market, leading to significant plunges in gold, silver, copper, platinum, and palladium prices. The U.S. Dollar Index saw a slight increase.

Amid renewed concerns from the outside world about whether massive artificial intelligence investments can truly scale up, U.S. tech stocks weakened. Metal prices suddenly plummeted, apparently due to algorithmic trading sell-offs, causing some investors to liquidate positions in commodities, including metals, to obtain liquidity. Some funds also shifted to U.S. Treasury bonds for safe-haven assets.

Spot gold prices fell by 4.1% at one point, while silver crashed by 11%. The London Metal Exchange (LME) copper price dropped by 2.9%. Subsequently, metal prices partially recovered from their losses:

At the New York closing on Thursday, spot gold fell by 3.26% to $4918.36 per ounce. Before midnight Beijing time, it maintained a slight downward trend, mostly stabilizing above $5050, then experienced a sharp dive, hitting a daily low of $4878.66. COMEX gold futures dropped by 3.06% to $4942.50 per ounce.

At the New York closing on Thursday, spot silver plummeted by 10.89% to $75.0942 per ounce. Before midnight Beijing time, it held steady above $82 and continued a slight decline, then underwent a rapid drop below $76 and hit a daily low of $74.4456 near the U.S. stock market close. COMEX silver futures fell by 10.56% to $75.050 per ounce.

As for other significant metals, COMEX copper futures fell by 3.65% to $5.7740 per pound, spot platinum dropped by 6.19%, and spot palladium by 5.89%.

Analyst Insights

Regarding Thursday's gold and silver movements, industry experts remarked: "Everything happened too quickly, feeling like a risk-off event. Even safe-haven assets like gold can be sold off by investors in need of liquidity during periods of extreme market stress."

The partial sell-offs of gold and silver on Thursday also stemmed from profit-taking, as the previous rapid surge was partly driven by speculative buying.

Some industry insiders pointed out that for gold and silver, a significant portion of trading is still largely driven by emotion and momentum. On days like this, they tend to struggle.

Since 2024, gold and silver have experienced a strong uptrend, with momentum buying driving metal prices to new highs. However, this trend came to a sudden halt on January 29, with gold seeing its largest single-day drop in over a decade and silver experiencing its largest drop on record. Subsequently, both metals have been trading in a narrow range with increased volatility in the absence of new catalysts.

Some analysts believe that Thursday's sharp decline in gold prices does not necessarily indicate the beginning of a sustained downtrend. However, it has indeed increased the likelihood of continued short-term volatility. The market has cleared out a significant chunk of liquidity below, and the next move will depend on price action around key technical levels.

Media analysis has pointed out that despite a minor rebound, the overall metal prices suffered a severe blow in a sudden drop similar to a "vacuum drop," more resembling a systematic strategy sell-off. This is commonly seen in momentum-driven derisking operations by the CTA (commodity trading advisor) community when key levels are breached.

Despite the recent setback, many analysts still expect gold to resume its uptrend, believing that factors driving the previous rally remain intact — including geopolitical tensions, questions about the Fed's independence, and a broader trend of shifting away from traditional assets (such as currency and sovereign bonds) to other assets. J.P. Morgan Private Bank projects a year-end gold price of $6,000 to $6,300 per ounce, with Deutsche Bank and Goldman Sachs also maintaining a bullish view.

The world's largest silver ETF, iShares Silver Trust, has seen significant trading of bullish options with a strike price of 125 for May/June, while investors have been selling contracts bought at higher levels, potentially further exacerbating the selling pressure on silver.

Traders are currently focused on U.S. economic data, including the heavyweight CPI data scheduled for release on Friday, to seek clues about the Federal Reserve's interest rate path. Lower borrowing costs are usually favorable for non-interest-bearing precious metals.

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