Metals Market Reels as Speculative Frenzy Cools: Chinese Investors at Center of Historic Gold, Silver Plunge

LONDON/SHANGHAI — The global metals market is picking up the pieces after a historic collapse last Friday that saw silver prices crater by 26% and gold fall 9%—its worst single-day drop in over a decade. The plunge, which extended into volatile Asian trading on Monday, has spotlighted the outsized role of Chinese speculative capital in driving the recent, gravity-defying rally across commodities from copper to tin.

For weeks, traders worldwide had operated on minimal sleep, tracking a blistering ascent that seemed untethered from traditional supply-demand fundamentals. That rally reached a fever pitch last Thursday, with gold touching a record $5,595 an ounce and silver soaring past $121. The reversal, when it came, was swift and brutal.

“In two decades of trading, I’ve never witnessed such volatility,” said Dominik Sperzel, head of trading at leading bullion refiner Heraeus Precious Metals. “Gold is meant to be a bastion of stability. This was anything but.”

The immediate catalyst was a strengthening U.S. dollar following reports that former Fed Governor Kevin Warsh was being considered for the central bank’s top job. Yet, analysts had long warned the market was overextended, fueled by a potent mix of retail frenzy, algorithmic trading, and—critically—a surge of “hot money” from Chinese speculators ranging from individual investors to equity funds diversifying into commodities.

This speculative wave transformed markets. The iShares Silver Trust (SLV) saw turnover explode to over $40 billion on Friday, making it one of the planet's most-traded securities. Options activity hit records, with retail forums buzzing over gains exceeding 1,000% from leveraged silver bets.

“We identified this as a pure momentum trade weeks ago,” noted Jay Hatfield, CIO at Infrastructure Capital Advisors. “The fundamentals were left behind. We were just waiting for the catalyst to unwind it.”

The unwind was global. European and U.S. traders worked around the clock to monitor Asian sessions, where the sharpest moves often originated. At a major coin conference in Germany, executives watched the crisis unfold in stunned silence on their phones.

Nicky Shiels, head of metals strategy at MKS PAMP SA, described Friday’s session as “parabolic, frenzied, and untradeable,” suggesting January 2026 would be remembered as “the most volatile month in precious metals history.”

Background & Analysis: The recent metals surge was rooted in deeper trends: central bank diversification away from the dollar and Western investor fears of currency debasement. However, its parabolic phase was distinctly fueled by Chinese capital seeking hedges against domestic uncertainty and currency risk. This created a feedback loop where rising prices attracted more trend-following algorithms, amplifying moves. The structure—particularly the massive build-up of call options—set the stage for a violent squeeze in both directions.

Attention now turns to whether Chinese demand will re-emerge after the shock. With Shanghai exchanges imposing daily move limits of 16-19% on silver contracts, prices may need to “catch down” to global benchmarks. Some Chinese banks have already announced new curbs on retail gold accumulation products, aiming to cool speculative fervor.

“Gold is seeing dip-buying interest ahead of the Lunar New Year,” observed Liu Shunmin, risk head at Shenzhen Guoxing Precious Metal Co. “But for silver, there’s a strong inclination to stand aside for now.”

Market Voices:

“This was a classic bubble inflated by easy leverage and herd mentality. Regulators in Shanghai and Beijing have been warning about this for months. The fact that Chinese banks are now tightening rules on retail gold products is a clear signal: the party’s over, and stability is the new priority.” — Michael Chen, Portfolio Manager at Hong Kong-based Atlas Capital (Hong Kong).

“To pin this solely on ‘Chinese speculators’ is lazy and borderline inflammatory. Global CTAs and ETF flows were just as responsible. This was a liquidity-driven rally that met a macro trigger. The narrative that Chinese investors are somehow uniquely destabilizing is a tired trope that ignores how integrated these markets have become.” — Dr. Elena Vargas, Senior Fellow, Global Commodities Institute (London).

“Are you kidding me? We just witnessed a trillion-dollar market get whipped around by Reddit posts and momentum algorithms chasing Chinese capital flows. This isn't investing; it's gambling with the global financial system as the casino. The Fed nomination story was just the match; the gasoline was poured months ago by unregulated, cross-border speculative torrents. When will we learn?” — Marcus Thorne, former CFTC regulator and author of “The Speculative Trap” (New York).

--With reporting by Alfred Cang and Winnie Zhu.

(Updates to include Monday's Asian trading activity.)

©2026 Financial Chronicle. All rights reserved.