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Precious Metals Rout Accelerates in Asian Trading
Gold futures plummeted to $4,900 per ounce during Monday's session, extending a brutal selloff that began last week. The precious metal's dramatic reversal came as the U.S. dollar index strengthened 0.2% against a basket of major currencies, making dollar-denominated gold more expensive for international buyers.
Holiday Liquidity Crunch Amplifies Volatility
The market rout intensified due to thin trading volumes across major Asian financial centers. Mainland Chinese, Hong Kong, Singapore, Taiwan and South Korean markets remained closed for Lunar New Year celebrations, while U.S. markets were shuttered Monday for Presidents' Day.
"The problem is volatility feeding on itself. As price swings intensify, liquidity thins," said Ole Hansen, head of commodity strategy at Saxo Bank. The lack of market participants created a vacuum where selling pressure faced minimal buying support.
Federal Reserve Policy Expectations Drive Dollar Rally
Market expectations for three 25-basis-point Federal Reserve rate cuts this year, according to CME's FedWatch Tool, have supported the dollar's recent strength. The greenback's advance directly pressured gold prices, as non-yielding bullion becomes less attractive when interest rates rise.
President Trump's nomination of Kevin Warsh as Federal Reserve Chair further boosted the dollar, as markets interpreted the selection as favoring more hawkish monetary policy. Warsh's historically conservative stance on inflation eased concerns about central bank independence.
Analysts Warn of Dangerous Parabolic Phase
"The continued surge across metals, especially gold and silver, is entering a dangerous phase," Hansen noted before the selloff accelerated. Bloomberg senior commodity strategist Mike McGlone warned that "the higher metals rise, the more likely 2026 will mark enduring price peaks."
Goldman Sachs analysts had set a year-end gold price target of $5,400 just last week, with potential upside from increased private-sector investment. However, the rapid price appreciation created conditions for the current reversal.Silver's Epic Rally Faces Reality Check
Silver's decline from $120 to below $75 per ounce represented a 40% correction from recent highs. JPMorgan analysts had previously cautioned that "Silver prices have already significantly overshot our forecasted averages, though calling a top is close to impossible in markets displaying near-parabolic price momentum."
The industrial metal's volatility exceeded even gold's dramatic moves, reflecting silver's smaller market size and higher speculative interest.
Geopolitical Tensions Fail to Support Metals
Despite ongoing U.S.-Iran nuclear talks in Geneva and President Trump's indirect involvement in diplomatic negotiations, traditional safe-haven demand failed to cushion precious metals. The dollar's strength and technical selling overwhelmed geopolitical premium considerations.
Platinum and palladium also declined, with platinum falling 0.8% to $2,025.05 per ounce and palladium dropping 1.5% to $1,698.10, suggesting broad-based precious metals weakness.The selloff marked a dramatic reversal for assets that had reached multi-year highs amid inflation concerns and currency debasement fears. Market participants now await Tuesday's resumption of full global trading to assess whether the correction will continue or stabilize at current levels.
Mentioned tickers: GC=F, SI=F, DX-Y.NYB, .DXY
