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

Title: Gold Once Dropped Over 4%, Silver Plummeted 11%, Did a Surge in Algorithmic Trading Trigger a Selloff in Precious Metals Amid a Major US Stock Drop?

Author: He Hao, Wall Street Insights

Author: Rhythm BlockBeats

Source:

Repost: Mars Financial

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

As concerns resurfaced over whether massive AI 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 initially fell by 4.1%, and silver plunged 11%. London Metal Exchange (LME) copper prices dropped 2.9%. Later, metal prices partially 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 the market closed, mostly staying above $5,050. Then, a sharp dive occurred, pushing the price to a daily low of $4,878.66. COMEX gold futures declined 3.06%, to $4,942.50 per ounce.

By Thursday (February 12) evening in New York, spot silver dropped 10.89%, to $75.0942 per ounce, remaining above $82 earlier before the decline. A rapid sell-off pushed prices below $76, and near the close of US stocks, the daily low was recorded at $74.4456. COMEX silver futures fell 10.56%, to $75.050 per ounce.

Regarding other key metals, COMEX copper futures declined 3.65%, to $5.7740 per pound. Spot platinum fell 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 so fast, it feels 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 was also profit-taking, as the previous rapid gains were partly driven by speculative buying.

Some industry experts pointed out 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 stopped on January 29, when gold experienced its largest single-day decline in over a decade, and silver saw its biggest drop on record. Since then, both metals have traded within a narrow range amid a lack of new catalysts, with increased volatility.

Analysts believe that the sudden drop in gold prices on Thursday does not necessarily indicate an imminent sustained downtrend. However, it does raise the possibility of continued short-term volatility. The market has cleared a large 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 strategy sell-offs—specifically, momentum-driven risk reduction 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 a broader shift 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 trading of May/June 125 strike call options, while investors sold previously purchased contracts at higher levels, potentially further intensifying silver’s selling pressure.

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