Gold and Silver Crash Erases $4.02T in One Day as Margin Hikes Trigger Liquidations
Gold and silver plunged sharply after historic rallies, wiping about $4.02 trillion from their combined market value in a single day. Gold fell to roughly $4,607/oz from a recent peak near $5,600 (down >20%), erasing some $7.4 trillion in market value; silver dropped below $80 from an all-time high of $121.64 (down ~40%), losing about $2.7 trillion. The immediate catalyst was a CME Group increase in margin requirements for gold and silver futures on Feb 2, which triggered cascading margin calls and forced liquidations — many leveraged positions reportedly ranged 50x–100x. A shift in Fed leadership expectations also weighed: the nomination of Kevin Warsh as Fed Chair was perceived as hawkish, strengthening the US dollar and reducing demand for non-yielding assets. Institutional outflows and ETF redemptions intensified selling; some precious-metals funds fell as much as 20% intraday. Volatility spilled into correlated markets (tech stocks, other metals), amplifying risk-off positioning. Technically, gold sits near a key support band ($4,400–$4,500); a hold could allow a short-term bounce, while a decisive break would signal further downside as remaining leverage unwinds. For traders: elevated volatility, rapid deleveraging, and policy-driven dollar strength increase short-term downside risk for precious metals; watch margin requirements, ETF flows, USD strength, and whether forced selling has exhausted leverage before initiating long positions.
Bearish
This event is bearish for precious metals and has negative spillovers for risk assets. The immediate driver — a sharp hike in CME margin requirements — mechanically forced leveraged positions to liquidate, producing rapid price declines; similar dynamics were seen in past deleveraging events (e.g., long-vol or leveraged ETF unwind episodes). The nomination of a perceived hawkish Fed Chair amplified dollar strength and reduced demand for non-yielding stores of value, reinforcing selling pressure. Institutional redemptions and ETF outflows compounded the move, meaning liquidity demand rather than purely fundamental revaluation drove the crash. Short-term implications: elevated volatility, higher funding/margin costs, and potential continuation of downside until forced sellers are exhausted and margins normalize. Traders should expect higher intraday swings, widened spreads, and possible short squeezes if liquidity tightens. Long-term impact depends on monetary policy path and real yields; if Fed tightening persists, metals face sustained headwinds, but if policy pivots or real yields decline, metals could recover — making current levels potentially attractive for longer-term value seekers once leverage is cleared and ETF flows stabilize.