Spot gold returns to the $5000/ounce mark

This' epic 'plunge began on the afternoon of January 30th, and as of the early morning of January 31st, the wave of selling has intensified, with spot gold and silver prices experiencing a cliff like decline, reaching a new stage high. According to Wind data, spot gold plummeted 12.92% during trading, directly breaking through the $4700/ounce mark and hitting a low of $4682/ounce. As of the close on January 31, the decline narrowed to 9.25%, at $4880.34/ounce, giving up all the gains of the week. Prior to this, on January 29, spot gold in the Asia Pacific region had risen to a high of $5598.75/ounce in midday trading, with a drop of over $900 in just two days, and the volatility was astonishing.

At the same time, the decline in spot silver was even more astonishing, with a sharp drop of 35.89% during trading, reaching a low of $74.28 per ounce. As of the close, it still fell 26.42% to $85.259 per ounce, giving up its previous significant gains. In addition to precious metals, industrial metals have not been spared, with LME copper, tin, aluminum and other varieties experiencing varying degrees of decline, forming a global metal market sell-off and spreading market panic.

Tracing back to the root cause of the sharp decline, the core lies in the sudden change in macroeconomic policy expectations. On January 30th, US President Trump announced on social media the nomination of former Federal Reserve Board member Kevin Walsh as the next chairman of the Federal Reserve, which became the "trigger" for the sharp drop in gold prices. Analysts believe that Walsh is seen as a candidate who can "re anchor the credibility of the Federal Reserve", and the market expects his position to be relatively hawkish. This change directly challenges the previously prevalent narrative of "weakened central bank independence - currency depreciation - perpetual rise of physical assets", driving the rebound of the US dollar and reducing the attractiveness of gold denominated in US dollars to global buyers, thereby triggering concentrated liquidation of precious metal bulls.

In addition, technical factors further amplified the decline. Before the sharp decline, the relative strength index (RSI) of gold had reached 90, the highest level in decades, indicating that gold prices were severely overbought and facing downward pressure; At the same time, during the continuous rise of gold prices in the early stage, the market accumulated a large amount of leveraged positions, and the sharp decline triggered additional margin notices, resulting in frequent forced selling. In addition, the exchange increased risk control and trading margin ratios, accelerating the exit of profit taking positions and further exacerbating the price decline.

At a time when the market is generally concerned that gold prices will continue to decline, international gold prices have experienced a strong rebound, staging a deep V reversal trend. On February 3rd, spot gold took the lead in stopping the decline and rebounding, re standing at the $4900/ounce mark, recovering all the losses of the previous day; On the morning of February 4th, the upward trend continued to ferment, once again breaking through the integer mark of $5000/ounce, marking the strongest single day rebound performance since November 2008, and market sentiment gradually returned to rationality from panic.

The strong rebound of gold prices this time is not accidental, but the result of multiple positive factors working together. Firstly, buying at low prices has become the core driving force behind the rebound. After two days of epic drops, the gold price has reached a temporary low, attracting a large number of medium - and long-term investors to invest on dips. At the same time, some long positions that were forced to close in the early stage have re entered to replenish their positions, driving the gold price to rise rapidly and forming a rebound trend driven by "bottom fishing funds+replenishment funds".

Secondly, the market's reinterpretation of the Federal Reserve's policy expectations has eased downward pressure. As panic gradually subsides, investors begin to view Walsh's nomination rationally, believing that his hawkish stance may not necessarily lead to aggressive interest rate hikes by the Federal Reserve. Market expectations for a rebound in the US dollar have cooled, and the US dollar index has slightly fallen, indirectly supporting the rise of gold prices denominated in US dollars. At the same time, market concerns about the independence of the Federal Reserve have further eased. Funds that had previously flowed into the precious metals market due to concerns about currency depreciation have returned to rational allocation, with some funds flowing back into the gold market.

Thirdly, the long-term support logic for gold remains unchanged, providing a solid foundation for rebound. Industry analysts point out that this sharp decline is mainly due to technical factors and short-term policy shocks, rather than fundamental deterioration of fundamentals. The core logic of gold's medium - to long-term rise still holds true. The credibility of the global credit currency system dominated by the US dollar continues to weaken, and issues such as the unsustainability of the US fiscal system and the loosening of US dollar hegemony are becoming increasingly prominent. The global de dollarization process is accelerating, and central banks around the world continue to increase their holdings of gold reserves, laying the foundation for the medium - to long-term rise of gold. In addition, factors such as global inflation pressure and geopolitical uncertainty still exist, and the safe haven and preservation functions of gold remain prominent, supporting the gradual return of gold prices to a reasonable range.

From a technical perspective, the daily bullish trend has broken through the Bollinger Bands, indicating that the gold price trend has shifted from volatile repair to short-term main rise, and the reversal signal is clear. Some market analysts predict that the focus of the subsequent upward trend in gold prices will be on the Fibonacci 618 level between $5140-5145 per ounce. There is expected to be short-term pressure here, and there is still a possibility of breakthrough after a brief correction. The medium - to long-term target is currently at $5300 per ounce.