After the plunge in gold and silver, all eyes are on Monday's opening in China.
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After experiencing the epic “Black Friday,” the global precious metals market is waiting for new directional signals, which will likely come from the Chinese market during Monday’s Asian trading session.
Last Friday, silver prices plummeted 26% in less than 20 hours, marking the largest single-day decline in history; gold simultaneously fell by 9%, its worst performance in over a decade. The market generally believes that the news of Trump planning to nominate Kevin Warsh as the next Federal Reserve Chair boosted the U.S. dollar exchange rate, directly triggering the collapse.
However, some traders have noted the important role played by the Asian market in this round of trading. Reports indicate that earlier, the influx of Chinese hot money drove a “parabolic” rally in the prices of gold, silver, and copper.
Wallstreetcn previously mentioned that Chinese investors nearly “blew up” copper purchases; Citi further described the silver market as “gold on steroids”, with the Chinese market taking a leading role.
In traders’ view, the key to the next step for the metals market is shifting to the opening performance of the Shanghai Gold Exchange and the Shanghai Futures Exchange to judge if Chinese demand for precious metals can recover after the massive sell-off.
Due to daily fluctuation limits of 16%-19% set by Chinese exchanges for silver contracts, the extreme drop in overseas prices last Friday means that Shanghai prices may see a violent “catch-up” adjustment after the opening.
Traders: From “Frenzy” to “Untradable”
“This is definitely the wildest market I have ever seen in my career,” said Dominik Sperzel, head of trading at Heraeus Metals. “Gold is supposed to be a symbol of stability, but this volatility is definitely not a symbol of stability.”
Nicky Shiels, head of metals strategy at MKS PAMP, described Friday’s market as “frenzied and untradable,” and noted that January 2026 will go down in history as “the most volatile month for precious metals.”
Alexander Campbell, former head of commodities at Bridgewater Associates, bluntly stated: “China has sold off, and now we are suffering the consequences.” Previously, due to expectations of impaired Fed independence and rising geopolitical tensions, a large number of Chinese retail and private equity funds poured into the metals market; Friday’s profit-taking triggered a chain reaction.
Hidden Concerns Behind the Frenzy: Momentum Trading Detached from Fundamentals
In fact, clear signs of overheating had already appeared before this crash.
A previous Wallstreetcn article noted that Citi Bank once proclaimed silver to be “gold on steroids” and pointed out that the rally was driven by China-led, India-following capital allocation logic, rather than traditional industrial demand. Citi pointed out that Chinese retail investors behave more like trend-following CTA (Commodity Trading Advisors) rather than value-returning investors.
However, this capital-driven rally has diverged from fundamentals. Data shows that as global prices soared, global silver ETF holdings (excluding China) actually saw net outflows since December.
Jay Hatfield, CIO of Infrastructure Capital Advisors, stated: “We concluded about three to four weeks ago that this had become a momentum trade rather than a fundamental trade. We just went along with it, waiting for this collapse to happen.”
Trina Chen, Co-Head of China Equities at Goldman Sachs, previously warned that the staggering rise in metal prices may have gotten ahead of real demand, and as Chinese physical buyers pull back due to high prices, the market may see a “technical adjustment.”
Physical Market: Shui Bei Still Has Premium, Retail Investors Waiting and Watching
Although the futures market is bleeding, Shenzhen’s Shui Bei market, a wind vane for China's physical precious metals trading, remains relatively calm.
According to feedback from local traders, silver tightness at Shui Bei eased somewhat over the weekend, with more sellers than buyers. However, it is worth noting that there has not been panic selling, and Shui Bei silver prices still maintain a premium over exchange contracts.
Liu Shunmin, risk manager at Shenzhen Guoxing Precious Metals, said: “Gold performed relatively strongly. In the past two days, I saw many bargain hunters buying jewelry and gold bars ahead of the Spring Festival. As for silver, there’s more of a wait-and-see attitude.”
This indicates that although speculative capital is withdrawing, traditional physical demand surrounding Spring Festival may provide some bottom support for the market.
China’s Major Banks Continue to Cool the Market
During this period of severe market volatility, Chinese financial institutions have strengthened risk control.
China Construction Bank announced that starting Monday, the minimum amount for gold accumulation accounts will be raised; ICBC said it would impose quota controls on related business during the holidays. These measures are intended to guide investors to participate rationally and prevent excessive speculation.
The next key is whether traditional physical purchasing ahead of the holiday can offset the shock caused by the withdrawal of speculative funds.
The market is confirming whether this event, “which one may only encounter once in a lifetime,” will fizzle out or regroup after the adjustment.
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