An extraordinary rout in precious metals rippled through global and Chinese markets on February 2, with spot silver tumbling below $75 an ounce (down more than 11%) and spot gold plunging from an intra-day quote of $4,703 to a low near $4,583. Chinese commodity futures mirrored the carnage: Shanghai silver, palladium and platinum contracts hit limit-downs while Shanghai gold fell nearly 12 percent. The sell-off spilled into equities, knocking leading miners and metal-related ETFs into circuit-breaker territory and forcing the suspension of certain funds and accounts.
Exchanges and regulators moved quickly to stem instability. The Shanghai Gold Exchange raised margins and adjusted daily price limits for its Ag(T+D) contract if a one-sided market persisted, and warned members to beef up risk plans. The Shanghai Futures Exchange and the Shenzhen exchange imposed position and withdrawal curbs on suspected coordinated or abusive trading, while both domestic and international venues—from the Shanghai bourse to CME Group—lifted margin requirements to dampen speculative leverage.
Market participants and research houses say the shock reflects more than a re-pricing of fundamentals. China International Capital Corporation warned that traditional drivers such as real interest rates no longer explain the price action, arguing that geopolitics and monetary-system narrative shifts are now dominating sentiment. Domestic and foreign analysts also point to forced liquidations, programmatic stop-losses and rapid de-leveraging after an extraordinary run-up—COMEX gold briefly exceeded $5,600 and silver climbed past $120 an ounce within weeks—which amplified the downside once momentum reversed.
The scale and speed of the moves are historically unusual. Observers note the recent advance's steep slope—unseen since the 1980s—and a single-day drop exceeding 10 percent that specialists say is unprecedented in modern markets. Some researchers warn of a possible second leg lower and choppy trading ahead, with near-term catalysts including the U.S. Federal Reserve nominee's hearings and remarks, the risk of a partial U.S. government shutdown, and imminent U.S. non-farm payrolls data.
Longer-term narratives remain contested. Several domestic research teams argue structural drivers—industrial demand for silver from energy transition and AI-related uses, limited near-term supply elasticity, and residual safe-haven demand for gold amid financial-system uncertainty—could sustain higher price floors over months. Contrastingly, other analysts emphasize that the latest move was dominated by retail and speculative flows rather than broad institutional positioning, leaving prices vulnerable to rapid reversals as liquidity tightens.
For global markets the episode is a reminder that fragile liquidity, high leverage and concentrated retail activity can produce outsized swings in so-called safe-haven assets. Rapidly tightened exchange risk controls may reduce near-term volatility but also fragment trading, pushing activity to other venues and complicating hedging for producers and funds. Investors and policymakers should expect continued heightened volatility in precious metals and its knock-on effects for miners, commodity-backed funds, and broader risk assets.