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Why am I now choosing to short gold and silver? — It’s not just bearish; I’m betting on a “return to normal”!

Over the past month, the precious metals market has staged an epic “bull-bear squeeze.” While retail investors are still debating whether to “buy the dip” or wait for a “bull turnaround,” I’ve chosen to side with the bears. This isn’t emotional venting but based on four solid logical levels.

1. Valuation Dimension: An Extreme Bubble Not Seen in 55 Years

The allocation of gold as a percentage of global GDP has soared to 0.7%, the highest since 1969. What is the normal range in history? 0.35%-0.4%.

What does this mean?
If the allocation reverts to the mean, gold prices face a risk of halving. Citigroup’s quantitative target is $2,500–$3,000 per ounce. The current price of $5,000 implies an upside potential of over 40% downside.

You may not trust investment banks’ words, but trust mathematics. Any asset that deviates too far from fundamentals must pay its debts.

2. Macro Dimension: The Last Pillar Is Being Removed

The recent rise in gold relied on “three arrows”: Fed rate cut expectations, weakening dollar credit, and safe-haven sentiment. Now, all three are working in reverse.

1. Sudden shift in monetary policy: Waller was nominated as Fed Chair, shifting market expectations from “rate cuts” to “hawkish reshaping.” Real interest rates and the dollar are returning as the core pricing factors — the worst combination for gold.
2. Geopolitical risks peak: In the second half of 2026, the probability of an agreement between Russia and Ukraine is very high. The market has not priced this in yet. Once safe-haven sentiment systematically recedes, gold will lose its last emotional support.

3. Market Structure: Crowded Longs Are Fuel

This decline isn’t due to sudden bad news but a “necessary correction after excessive longs.”

· Leverage Liquidation: Gold prices rose nearly 30% in January alone, with many retail investors using aggressive leverage at high levels. Institutions won’t lift the market; they’ll suppress it to force liquidations.
· Capital Outflows: In just one week, the domestic gold ETF assets shrank by 42.7 billion yuan, with 6.6 billion yuan in net redemptions and a net value evaporation of 36.1 billion yuan. This isn’t panic; it’s disciplined retreat of short-term speculative funds.

Bloomberg senior strategist McGlone issued a clear warning: gold is more likely to test $4,000 than to break through $6,000.

4. Silver: Volatility Trap

Recently, silver’s single-day drops often exceed 15%, with volatility reaching its highest since 1980. While the short squeeze story sounds appealing, TD Securities has already lost nearly $2.4 million on silver shorts.

My view: Don’t be brainwashed by the short squeeze stories. High volatility is a friend to shorts — with industrial demand under pressure and monetary properties far weaker than gold, once gold collapses, silver will fall even harder.

Finally, a word:

I am not long-term bearish on gold. De-dollarization and central bank gold purchases remain long-term supports. But in the short term, sentiment premiums are too high, valuations are too expensive, and macro turning points are already visible.

The current strategy is simple:
Don’t aim to be a hero catching the bottom; be a gambler betting on mean reversion.

Core operation: Short on rallies, no leverage, hold the cycle.

(Risk warning: This article is for logical sharing only. Markets are risky, and shorting requires strict trading discipline. Waller’s policy statements and non-farm payroll data can trigger sharp rebounds at any time. Do not follow blindly.)