Gold extends biggest fall in over a decade, rattling Asia stock markets

SINGAPORE – Gold extended losses on Feb 2 after its biggest plunge in over a decade on Jan 30, while silver’s year-to-date gains were wiped out as a record-breaking precious-metals rally unwound at breakneck speed.

Spot gold fell as much as 10 per cent after a 9 per cent tumble on Jan 30. Bullion has lost more than US$1,000 an ounce since hitting a record high at US$5,594.82 on Jan 29, erasing most of its 2026 gains.

Silver slumped as much as 16 per cent, following on from a 26 per cent plunge on Jan 30 that was the steepest on record.

“This isn’t over,” said Mr Robert Gottlieb, a former precious metals trader at JPMorgan Chase & Co and now an independent market commentator. “We’ve got to see if it’s going to find support. The bottom line is that the trade was way too crowded.”

The slide in precious metals rattled Asia’s stock markets on Feb 2.

Indonesian stocks slid 4.9 per cent as the collapse in precious metals hurt investor sentiment, which was already on eggshells after an US$80 billion (S$102 billion) market rout last week. Japan’s Nikkei index lost 1.25 per cent, while Hong Kong’s Hang Seng Index fell 2.2 per cent and China’s Shanghai Composite dropped 2.5 per cent.

In Singapore, the Straits Times Index closed down 0.3 per cent, paring heavier losses earlier in the session. Shares of Catalist-listed CNMC Goldmine lost 8.4 per cent, or 12 cents, to close at $1.31.

Precious metals had risen to all-time highs that shocked even seasoned traders. An already-scorching rally accelerated sharply in January, as investors piled into gold and silver on renewed concerns about geopolitical turmoil, currency debasement and the US Federal Reserve’s independence.

A wave of buying from Chinese speculators

added froth to the rally.

The extent to which Chinese investors buy the dips will play a key role in determining the direction of the market after Jan 30’s retreat.

While the Shanghai benchmark price extended a fall after the market opened, it was still trading at a premium over the international price. Over the weekend, buyers flocked to the country’s biggest bullion marketplace in Shenzhen to stock up on gold jewellery and bars ahead of Chinese New Year on Feb 17.

“The combination of heightened volatility and the proximity of Chinese New Year will prompt traders to trim positions and reduce risk,” said Jinrui Futures analyst Wu Zijie. At the same time – particularly in peak buying season – the pullback in prices is likely to support retail demand in China, he said.

The trigger for Jan 30’s dramatic sell-off was the news that US President Donald Trump would nominate Mr Kevin Warsh to lead the Fed, which sent the dollar higher and undercut sentiment among investors who had bet on Mr Trump’s willingness to let the currency weaken.

Traders regard Mr Warsh as the toughest inflation fighter among the final candidates, raising expectations of monetary policy that would underpin the dollar and weaken greenback-priced bullion.

But precious metals had already been primed for extreme moves, as soaring prices and volatility strained traders’ risk models and balance sheets.

A record wave of purchases of call options – contracts which give holders the right to buy at a predetermined price – had mechanically reinforced upward price momentum, Goldman Sachs Group said in a note, as the sellers of the options hedged their exposure to rising prices by buying more.

For silver, waves of hot money in China have contributed to domestic supply tightness, but that may subside as the rout damps investment demand, China Futures analyst Wang Yanqing said in a note. “Once the consensus expectation of a one-way rally is broken, shorts’ willingness to make delivery will increase, helping to ease the shortage,” he said.

At 3.21pm Singapore time, gold was down 7.3 per cent at US$4,536.46 an ounce. Silver lost 15 per cent to US$72.68. Platinum and palladium also retreated. The Bloomberg Dollar Spot Index, a gauge of the US currency, rose 0.1 per cent after gaining 0.9 per cent in the previous session. BLOOMBERG, REUTERS