Gold once dropped over 4%, silver plummeted 11%, and the sharp decline in U.S. stocks triggered algorithmic trading to sell off precious metals?

Author: He Hao, Wall Street Insights

On Thursday, U.S. stocks plummeted, with the Nasdaq down over 2%. Some traders sold off precious metals to offset losses in the stock market, leading to sharp declines in gold, silver, copper, platinum, and palladium. The US dollar index rose slightly.

As concerns resurfaced over whether massive artificial intelligence investments can truly be implemented at scale, US tech stocks declined. Metal prices suddenly dropped amid suspected algorithmic trading sell-offs, prompting some investors to exit commodity positions including metals to gain liquidity, while others shifted funds into US Treasuries for safety.

Spot gold briefly fell by 4.1%, and silver plunged 11%. London Metal Exchange (LME) copper prices declined by 2.9%. Later, metal prices recovered some of their losses:

On Thursday, during New York’s late trading session, spot gold fell 3.26%, to $4,918.36 per ounce, maintaining a slight decline before midnight Beijing time, mostly staying above $5,050. Then, a sharp dive occurred, hitting a daily low of $4,878.66. COMEX gold futures dropped 3.06%, to $4,942.50 per ounce.

By Thursday’s (February 12) close in New York, spot silver fell 10.89%, to $75.0942 per ounce, initially holding above $82 before a rapid decline, breaking below $76, and nearing the close, hitting a daily low of $74.4456. COMEX silver futures declined 10.56%, to $75.050 per ounce.

Regarding other key metals, COMEX copper futures fell 3.65%, to $5.7740 per pound, spot platinum declined 6.19%, and spot palladium dropped 5.89%.

What do analysts think?

Regarding Thursday’s gold and silver movements, industry insiders said: “It all happened too fast, feeling like a risk-off environment. During extreme market stress, even safe-haven assets like gold can be sold off by investors needing liquidity.”

Part of Thursday’s sell-off in gold and silver also stemmed from profit-taking, as their recent rapid gains were partly driven by speculative buying.

Some industry experts note that trading in gold and silver remains largely driven by sentiment and momentum. On days like this, they tend to perform poorly.

Since 2024, gold and silver have surged strongly, with momentum-driven buying pushing prices to new highs repeatedly. But this trend abruptly halted on January 29, when gold experienced its largest single-day drop in over a decade, and silver saw its biggest decline on record. Since then, both metals have traded within narrow ranges amid a lack of new catalysts, with increased volatility.

Analysts believe that Thursday’s sudden drop in gold prices does not necessarily signal an imminent sustained downtrend. However, it does raise the possibility of continued short-term volatility. The market has cleared a significant liquidity zone below, and the next move will depend on how prices perform near key technical levels.

Media analysis suggests that although there was a slight rebound, overall, metal prices were heavily impacted by a sudden “vacuum decline,” resembling systematic selling—specifically, momentum-driven risk-off moves by CTA (commodity trading advisor) groups when key levels are breached.

Despite recent sharp declines, many analysts still expect gold to resume its upward trend, citing factors that previously supported gains—such as geopolitical tensions, questions about the Federal Reserve’s independence, and broader shifts from traditional assets like currencies and sovereign bonds to other asset classes. JPMorgan Private Bank forecasts gold could reach $6,000 to $6,300 per ounce by year-end, with Deutsche Bank and Goldman Sachs maintaining bullish outlooks.

The world’s largest silver ETF, iShares Silver Trust, saw significant options trading—buying large amounts of May/June 125 strike call options—while investors sold previously purchased contracts at higher levels, potentially further increasing silver’s selling pressure.

Traders are currently watching US economic data, including the upcoming key CPI report on Friday, to gauge the Fed’s rate path. Lower borrowing costs generally benefit precious metals that do not generate interest income.

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