Why did gold prices plummet? The largest single-day drop in nearly 40 years. What is the future outlook for gold prices?

The gold market is experiencing a sharp correction. After reaching a record high of 53 times in January 2026, the precious metals market suddenly shifted.

Market data reveal a shocking reality: the spot price of London gold is reported at $4,665.35 per ounce, down 9.45%, marking the largest single-day decline in nearly 40 years.

The silver market is similarly brutal, closing down 26.77% at $80.6 per ounce, the biggest single-day drop since 1980. Throughout January, the precious metals market experienced intense volatility, plummeting from a near-record high of around $5,600 per ounce.

01 Market Shock

In the last week of January 2026, the global precious metals market underwent a dramatic adjustment. The spot gold price plummeted 9.5% from the record high of $5,596 per ounce on January 29, touching a low of $4,404 during trading.

Trading data show that U.S. February gold futures were even more severely hit, falling 11.4%, with an intraday low of $4,700 per ounce.

The magnitude and speed of this correction are unprecedented. Looking at the entire January, gold still rose over 12%, continuing a six-month rally. This extreme volatility highlights the rapid shift from euphoria to panic in the market, making January the most turbulent month in precious metals history.

02 Trigger Factors

This significant pullback in gold prices was not caused by a single factor but by multiple forces acting together.

The most direct trigger was the potential change in the leadership of the Federal Reserve. On January 30, Kevin Woorch was nominated as the next Fed Chair.

Woorch advocates for reducing the balance sheet and adopts a cautious stance on easing policies. The market generally interpreted this as a relatively “hawkish” signal, altering investors’ expectations for the Fed’s future policy path.

On the trading front, profit-taking pressure became a key driver of the sell-off. Gold prices in January surged by as much as 20%, significantly boosting the momentum for investors to lock in profits.

03 Chain Reaction

The chain reaction in the precious metals market was not limited to gold. Silver prices performed even worse, plunging 27.7% from last Thursday’s high of $121.48 per ounce to close at $80.6.

Market volatility even transmitted to physical gold trading. Traders in Shenzhen’s Shuibei market chose to lock in their positions after the price collapse, opting not to sell.

Some traders stated that currently, gold bars are “first come, first served,” because “it’s not easy to get supplies.” A Shuibei market trader pointed out that since January 30, traders have been less willing to sell.

04 Institutional Perspectives

In the face of this market upheaval, major financial institutions offered different analyses. UBS analysts remain optimistic, predicting gold could reach $6,200 in March and end the year at around $5,900.

JPMorgan is even more bullish, forecasting that due to strong demand from central banks and investors, gold could hit $6,300 per ounce by year-end.

Suki Cooper, Global Head of Commodity Research at Standard Chartered Bank, believes the market correction was expected, driven by multiple factors leading to profit-taking. Lu Zhe, Chief Economist at Dongwu Securities, analyzed that this sharp decline in precious metals was largely due to increased volatility and the unwinding of trading positions amid rapid asset price rises.

05 Deep Logic

The core factors driving the long-term trend of gold have not fundamentally changed. Structural supports for this gold bull market include de-dollarization, global geopolitical risks, and central bank gold purchases.

According to the World Gold Council, in 2025, global central bank gold purchases reached 863 tons, remaining at a high level historically. This continues the high demand trend seen in 2022, when global central banks bought a record 1,136 tons of gold, the highest since 1967.

Behind the central bank gold buying spree is the market’s partial shake-up of the existing dollar-dominated credit system and the demand for alternatives. Yang Chao, an analyst at China Galaxy Securities, pointed out that the long-term factors influencing this bull market include central bank gold purchases worldwide, a weakening dollar, reshaping of the global monetary system, and shifts in global order and strategic asset allocation.

06 Market Outlook

In the short term, the gold market may enter a phase of wide-range volatility. Analysts believe that after the correction, gold will resume a new upward trend.

Historically, gold prices tend to rise in tandem with increasing volatility. This correction is seen as a market-driven cooling-off after an overheated bull run, helping to release excess enthusiasm and re-accumulate strength for the next rally.

Looking ahead to the coming week, a series of economic data releases could influence gold prices: Monday’s ISM Manufacturing PMI, Tuesday’s JOLTS job openings, Wednesday’s ADP employment report and ISM Services PMI, Thursday’s Bank of England and European Central Bank statements, U.S. unemployment claims, and Friday’s non-farm payrolls and consumer confidence surveys.

These data will provide important clues for assessing the U.S. economic outlook and the Federal Reserve’s policy direction.

07 Insights for the Crypto Market

The intense volatility in the gold market offers important lessons for cryptocurrency investors. Recently, Bitcoin has fallen to its lowest level since last year’s tariff shock, and its reputation as “digital gold” is gradually eroding.

Crypto advocates have long touted Bitcoin as “digital gold,” a virtual equivalent of precious metals. Pimco Managing Director Pramol Dhawan pointed out that the narrative of Bitcoin as “digital gold” is now “non-existent,” and its price decline indicates it is not a “monetary revolution.”

This correction in gold reveals that all assets considered “safe havens” face similar challenges: they are driven not only by fundamentals but also amplified by market sentiment and macro policy shifts.

Gold and cryptocurrencies are not simply substitutes but tend to oscillate between strong positive and negative correlations depending on the dominant macro narrative.

Future Outlook

On Monday (February 2), during Asian market hours, gold and silver opened lower and continued to decline, with spot gold dropping over 3% at one point to a low of $4,404 per ounce. Amid the intense turbulence in the global precious metals market, an interesting phenomenon occurred in Shenzhen’s Shuibei physical gold trading: when asked if anyone was “bottom-fishing” for gold, some traders said there are still buyers because they “are optimistic about long-term gold prices.”

Meanwhile, in the crypto market, as gold prices began to plunge, Bitcoin had already fallen to its lowest level since last year’s tariff shock, and its reputation as “digital gold” is gradually disintegrating.