Gold and silver plummeted on Thursday, triggered by algorithmic trading sell-offs due to a sharp decline in U.S. stocks?

On Thursday, U.S. stocks fell sharply, with the Nasdaq dropping over 2%. Some traders sold precious metals to offset losses in the stock market, leading to significant declines in gold, silver, and copper, while platinum and palladium also fell. The U.S. dollar index rose slightly.

As concerns grow about whether massive investments in artificial intelligence can truly scale, U.S. tech stocks declined. Metal prices suddenly dropped under suspected algorithmic trading sell-offs, forcing some investors to exit commodity positions, including metals, to gain liquidity, while some funds shifted to U.S. Treasury bonds for safety.

Spot gold briefly fell by 4.1%, and silver plummeted by 11%. Copper prices on the London Metal Exchange (LME) dropped by 2.9%. Subsequently, metal prices narrowed some of their losses.

By the end of trading in New York on Thursday, spot gold was down 3.26%, priced at $4,918.36 per ounce, maintaining a slight decline before 00:00 Beijing time, primarily stabilizing above $5,050, before experiencing a sharp drop that refreshed the daily low to $4,878.66. COMEX gold futures fell by 3.06%, priced at $4,942.50 per ounce.

What do analysts think?

Regarding the movements of gold and silver on Thursday, industry insiders stated: “Everything happened too quickly; it feels like a risk-off market. During extreme market pressure, even safe-haven assets like gold can be sold off by investors in urgent need of liquidity.”

Some of the selling in gold and silver on Thursday also stemmed from profit-taking, as a previous surge was partly driven by speculative buying.

Industry insiders pointed out that trading in gold and silver is largely driven by sentiment and momentum. On such days, they tend to perform poorly.

Since 2024, gold and silver have risen sharply, with momentum-driven buying pushing metal prices to new highs. However, this trend abruptly halted on January 29, when gold recorded its largest single-day drop in over a decade, and silver experienced its largest recorded drop. Since then, both metals have oscillated within a narrow range, with increased volatility due to a lack of new catalysts.

Some analysts believe that Thursday's sudden drop in gold prices does not indicate that it is about to enter a sustained downtrend. However, it does increase the likelihood of continued volatility in the short term. The market has cleared a significant portion of the lower liquidity area, and the next movement will depend on price performance near key technical levels.

Media analysis indicates that despite a slight rebound, overall, metal prices were severely impacted by a sudden drop resembling a "vacuum decline," more akin to systematic strategy sell-offs, which are common momentum-driven risk-off operations by CTAs (Commodity Trading Advisors) when key price levels are breached.

Despite the recent sharp decline, many analysts still expect gold to regain an upward trend, believing that the factors driving the previous rise remain in place—such as geopolitical tensions, doubts about the independence of the Federal Reserve, and a broader trend of shifting from traditional assets (like currencies and sovereign bonds) to other assets. JPMorgan Private Bank expects gold prices to reach $6,000 to $6,300 per ounce by the end of the year, while Deutsche Bank and Goldman Sachs also maintain a bullish outlook The world's largest silver ETF, iShares Silver Trust, has seen a large volume of call option trading with a strike price of 125 for May/June. At the same time, investors are selling contracts that were previously bought at high prices, which may further intensify the selling pressure on silver.

Traders are currently focusing on U.S. economic data, including the crucial CPI data to be released on Friday, to look for clues about the Federal Reserve's interest rate path. Lower borrowing costs typically benefit precious metals that do not generate interest income