From late January to early February 2026, the precious metals market experienced significant turbulence. Today, the main contract Gold 2604 opened at 1,140.00 yuan per gram and closed at 1,008.60 yuan per gram, marking a decline of 15.73% and approaching the daily downside limit. The main contract Silver 2604 opened at 25,960 yuan per kilogram and closed at 24,832 yuan per kilogram, falling 17.00% and hitting the daily limit.
The catalyst for this round of extreme market movements likely stems from the market's reassessment of the monetary policy stance expected from the new Federal Reserve Chair, Warsh. Reviewing Warsh's historical positions on monetary policy, the market appears concerned that the Fed might further slow the pace of monetary easing during 2026, thereby putting downward pressure on precious metal prices.
From a price perspective, the previous substantial rally in gold had imbued it with certain characteristics of a "risk asset," creating a strong inherent need for a price correction. Furthermore, excessively crowded long positions made the market vulnerable to a cascade of selling during a downturn, further driving gold prices lower. The logic for silver is similar: previously overcrowded long positions, combined with the substantial unrealized gains accumulated during the prior unilateral price increase, made the market prone to a sharp sell-off and a stampede effect when prices began to fall.
Looking ahead, gold is expected to remain an irreplaceable asset for value preservation. Given the ongoing logic of seeking alternatives to U.S. dollar-denominated assets and the persistence of a safety premium, buying on dips is still the recommended strategy for gold, although the risk of further short-term corrections cannot be ruled out. Due to its excessively high volatility, a wait-and-see approach is currently advised for silver.
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