'Unprecedented' Crash Sees Gold Sink 21% from Record High, Silver Price Drops 40%

GOLD and SILVER prices extended last week's historic rout on Monday but still showed year-to-date gains as February began, plunging as base metals also fell again while the Dollar continued to rise further from 4-year lows following President Trump picking Kevin Warsh as the next chairman of the Federal Reserve, writes Atsuko Whitehouse at BullionVault.

Trading exchanges in the US and China again raised margins as volatility rose yet again.

Over-the-counter spot gold quotes in London − the global reference rate for bullion prices, set by buyers and sellers dealing directly with each other rather than via exchange-traded contracts − dropped as much as 10.0% from Friday's close to hit $4404 per Troy ounce.

That marked a drop of 21.2% from Thursday's all-time record gold high near $5600.

London silver prices meantime fell as much as 13.7% to $71.67 per ounce, losing 41.1% from last week's new all-time spot market high above $121.

"Having observed this market for 40 years, this level of volatility is unprecedented," says Bruce Ikemizu, formerly head of giant Chinese bank ICBC's Tokyo precious metals desk and now head of the Japan Bullion Market Association.

"A historic rally across metals has turned into an equally historic rout," says derivatives platform Saxo Bank's Strategy Team.

Both gold and silver then rebounded from Monday's fresh plunge, rallying as high as $4800 and $84 respectively before edging lower once more, but still showing 9.1% and 9.4% gains from New Year's Eve less than 5 weeks ago.

"Even with the recent near-term volatility," says analysis from the USA's largest bank J.P.Morgan, "we remain firmly bullishly convicted in gold over the medium term on the back of a clean, structural, continued diversification trend.

"[It] has further to run amid a still well-entrenched regime of real-asset outperformance versus paper assets," says JPM, forecasting gold 2026 prices will reach $6300 per ounce.

The Dollar Index − a measure of the US currency's value versus its major peers − rose 0.3% on Monday, extending its rebound from last week's 4-year low.

The DXY has now slipped by 0.7% year-to-date.

Global stock markets fell for a third consecutive session on the MSCI World Index, although they still show a 1.4% year-to-date gain.

Base metals also "slumped significantly" as February's trading began on the London Metal Exchange, notes Fast Markets correspondent Andrew Hotter, with 3-month tin contracts down over 8% and nickel losing more than 5%.

Nymex copper futures on the CME derivatives exchange in New York fell again too, plunging as much as 15% from Thursday's spike to new all-time highs.

The CME Group on Saturday announced trading margin hikes on its Comex precious-metal futures, with the changes set to take effect after Monday's market close.

The Shanghai Gold Exchange meanwhile raised margin requirements and adjusted daily price limits for silver deferred contracts, while the Shanghai Futures Exchange tightened trading rules for key metals including gold and silver for the second time in a week.

SGE gold prices in China − the No.1 mining producer, household consumer, central-bank buyer, and net importer − fell 12.9% on Monday to the lowest since 9th January at ¥1011 per gram.

That put the SGE benchmark at a discount of nearly $12 per Troy ounce to equivalent London OTC spot market prices, more than reversing Friday premium of $19 and indicating weaker demand as the incentive for new imports evaporated.

Silver prices on the SGE fell even harder, down by 27.3% to a 3-week low of ¥20,353 per gram. But the more industrially-useful precious metal still held a historic premium over London quotes worth the equivalent of $15 per Troy ounce.

The giant iShares' silver ETF (NYSEArca: SLV) on Friday saw more than $40 billion in trading volume, topping the record silver ETF turnover seen only last Monday.

That made the SLV one of the most traded securities in history, exceeding Friday's volume in trillion-dollar mega-tech stocks Apple and Amazon combined.