Market Instability of Precious Metals: When Volatility Creates Waves of Liquidity

Since early February 2026, the commodity market has faced a whirlpool of turbulence triggered by extreme fluctuations in the precious metals sector. The volatility affecting gold and silver is not just a temporary phenomenon but reflects the complex dynamics of interconnected global markets. Data from Jin10 reveals that this wave of selling has created challenging market conditions for various investor segments.

First Wave: Gold and Silver Experience Continuous Selling Pressure

On February 2nd, the precious metals market underwent a sharp correction, triggering a chain reaction across the investment ecosystem. Massive sell-offs in gold and silver are not merely responses to short-term price changes but manifestations of deeper market sentiment. Seo Sang-Young, a leading analyst at Seoul Mirae Asset Securities, noted that this wave of selling has caused significant liquidity disruptions among institutional investors. This instability then spread to the equity markets, causing sharp declines followed by massive portfolio adjustments.

Mechanisms Behind the Turbulence: Margin Calls and Chain Reactions

The core of the market volatility lies in leverage mechanisms and sensitive risk management. When precious metal prices move contrary to expectations, automatic triggers occur in the form of margin calls and stop-loss activations. Christopher Wong, a strategist at OCBC Bank Singapore, explained that the combination of technical pressures—stemming from trend reversals—and shifts in investor sentiment has created an environment prone to panic selling. This process repeats in cycles that deepen the decline, creating a domino effect in derivatives and securities markets.

Supporting Factors: US Dollar, Yields, and Policy Concerns

Behind the turbulence in precious metals are three fundamental pillars that remain primary drivers of volatility. First, the sensitivity of the US dollar remains high given its impact on global commodity competitiveness. Second, adjustments in bond yields reflect investor expectations regarding future monetary policy directions. Third, unresolved concerns about Federal Reserve policies continue to add layers of uncertainty in the market. The combination of these three factors results in an environment where volatility is not only temporary but could persist in the medium term.

Although precious metal prices have corrected from their highs, sensitivity to these three pillars shows no signs of diminishing. Passive selling triggered by automatic mechanisms continues to deepen market pressure, indicating that market volatility remains active and requires careful attention from market participants.