Gold Falls in Asia: Dollar Strengthens, Margins Rise, Leverage Forced Out
Gold Falls in Asia: Dollar Strengthens, Margins Rise, Leverage Forced Out
Gold prices were shaken again at the opening of the week in Asia, continuing the extreme volatility that erupted at the end of last week. On Monday (February 2nd), spot gold fell around 4.5% to $4,671 per ounce, after plunging nearly 10% the previous Friday—indicating the market remains fragile and sensitive to liquidation flows.
The main pressure came from the strengthening US dollar after markets digested the appointment of Kevin Warsh as Donald Trump's next Federal Reserve chairman. Market participants believed Warsh was less likely to push for interest rate cuts as aggressively as previously anticipated, thus providing support for the USD and pressure on gold (priced in dollars).
At the same time, "mechanical" factors exacerbated the decline: CME Group raised margin requirements (performance bonds) for gold contracts, including schemes, from 6% to 8% for some tenors, effective Monday (February 2nd). This margin increase typically forces traders using borrowed funds to increase collateral. Otherwise, positions could be closed automatically—creating forced selling that makes the decline feel even sharper.
Sentiment is also still influenced by the lingering effects of the “extreme reversal” in the precious metals market last week. Several reports noted that gold experienced its biggest intraday decline in decades, while silver experienced an extreme decline—prompting market participants to de-risk across metal assets. In such conditions, the correction is no longer purely a matter of fundamental opinion, but also of overstretched positions and the need for a quick exit when volatility spikes.
In terms of geopolitical risk premium, the market also received signals that somewhat eased fears of escalation, after Trump said Iran was “serious about talking” with Washington—causing some safe-haven support to fade temporarily.
Looking ahead, market participants are eyeing a catalyst-packed week: the release of US payrolls data and a series of major central bank meetings, which could further shift interest rate expectations and the direction of the dollar. As long as the USD remains firm and metal volatility persists, gold has the potential to continue its wild swings with rapid fluctuations. (mrv)
Source: Newsmaker.id
