Gold: Overdue correction

Michael Blumenroth analyzes the sharp decline in gold and silver prices since the beginning of February 2026.

February 6, 2026. FRANKFURT (Xetra-Gold). What happened last Friday and Monday this week was beyond my wildest nightmares, and even old hands, i.e., long-time observers of the precious metals markets, are unlikely to have experienced a setback of this magnitude before.

Price slumps on the precious metals markets

From Thursday evening last week to Monday evening, gold prices had fallen by around 13.3 percent in two trading days – the sharpest two-day decline since 2013 and the second largest since the 1980s. And that was after prices had already recovered somewhat from their lows on Monday morning. Silver also came under massive pressure, with prices suffering a historic two-day slump of 31.5 percent. This movement marks the largest two-day loss since Bloomberg began recording daily data in 1950.

While the press often cited US President Donald Trump's nomination of Kevin Warsh as the new chairman of the US Federal Reserve as the trigger for a recovery in the US dollar – during his first term at the Fed under Ben Bernanke, Warsh distinguished himself as a proponent of more restrictive monetary policy and higher key interest rates – I believe that two other reasons may have been more significant:

Selling pressure due to increase in CME margins for gold and silver

Apart from the fact that the history of the financial markets teaches us that short and sometimes sharp price corrections usually occur when the prices of an asset rise too quickly in too short a time without correction, spectacular price rallies often also attract the attention of stock exchange operators: Over the weekend, an American futures exchange announced that it would require higher collateral for precious metals. These margins were raised from six to eight percent for gold and from eleven to 15 percent for silver. This increases capital requirements and often causes short-term, speculative investors to close their positions – in the current case, their long positions.

The second important reason could lie in the options markets. Where there is a buyer, there is also a seller of an option. Put simply, this means that if the price of gold rises, the seller must buy more on the market, but if the price falls, the seller must sell gold. And if prices fall quickly and sharply, there is often no choice but to sell regardless of the current price.

Gold temporarily trades below US$5,000 per ounce

In figures: while gold prices were still trading close to the record high of US$5,595 per ounce on Thursday morning last week, namely at US$5,515, they slipped to US$5,210 on Thursday afternoon, which was virtually the first warning sign. After recovering to $5,450 by Friday morning, prices plummeted to $4,895 at the end of the week. The slump continued at the start of trading on Monday morning: At around 7:30 a.m., the day's low was marked at $4,403, before prices almost touched the $5,000 per ounce mark again on Tuesday and recovered further to $5,090 today, Wednesday. At the time of writing, at 2:30 p.m., gold is trading at $5,050 per ounce.

Xetra Gold at weekly low of €125 per gram

The Xetra Gold price also fell amid strong fluctuations: during normal trading hours, it rose from €148.75 per gram last Thursday morning to a new record high of €149.10 on the same day. By the end of the week, it had already fallen to €134.50, and on Monday, the week's low to date was marked at €125.00. Here, too, a recovery to €138.30 followed, and it is currently (Wednesday afternoon, 2:30 p.m.) trading at around €137 per gram.

The end of the rally?

Overall, the reasons that prompted investors to invest in gold are unlikely to disappear overnight (geopolitical uncertainties and the desire for greater diversification). The next few days will show to what extent investors are now becoming more cautious about buying gold. Data suggests that many investors viewed the sharp price decline as a buying opportunity, whether physically or through ETCs. The Chinese New Year celebrations the week after next could lead to a noticeable decline in demand from China in the short term.

I wish all readers strong nerves and better weather.