Precious metals markets endured a brutal selloff on Thursday, February 5, 2026, with silver plummeting as much as 16-18% and gold dropping over 3% in a single session. This erased the brief two-day recovery that followed last week's historic rout, leaving spot silver below $80 per ounce after touching $120 earlier in the year, and gold hovering near $4,900—far from its January peak of about $5,600.

Multiple Forces Converge on Selloff

The downturn was triggered by hawkish signals from the U.S. Federal Reserve. Governor Lisa Cook, speaking at the Economic Club of Miami on February 4, emphasized inflation risks as the primary threat, stating they are "tilted toward higher inflation" and signaling no rush for rate cuts. This stance, combined with President Donald Trump's nomination of Kevin Warsh—a known monetary policy hawk—as the next Fed chair, bolstered the U.S. dollar and crushed demand for non-yielding assets like gold and silver.

Geopolitical easing added fuel to the fire. High-level U.S.-Iran talks set for Friday in Oman reduced safe-haven buying that had propelled January's rally. Compounding this, China's four largest gold-backed ETFs posted record outflows of nearly $1 billion (6.8 billion yuan) on Tuesday, as plunging prices eroded confidence among investors.

ETFs and Margin Calls Intensify the Pain

Silver ETFs suffered the worst, with funds like Kotak Silver ETF down up to 18% and others falling 13-21%, underscoring silver's volatility as both an industrial metal and safe-haven. Gold ETFs lost around 5%, a milder hit reflecting their relative stability.

Exchanges amplified the chaos by hiking margin requirements. The CME Group raised COMEX gold futures margins to 8% from 6% and silver to 15% from 11%, compelling leveraged speculators to unwind positions en masse. Goldman Sachs highlighted how dealer hedging flipped to selling into weakness, sparking stop-loss cascades and further liquidations. Sun Garg of Lighthouse advised caution, noting speculative froth from the rally persists. 

A Historic Correction in Context

This marks a sharp reversal from January's frenzy. Silver's 30% plunge on January 30 was its worst single-day drop since 1980, while gold's 10% fall echoed its steepest decline since 1983—both tied to the Warsh nomination news. Yet year-to-date, silver remains up over 30% despite the air pocket.

Long-term bulls stay optimistic. Christopher Forbes of CMC Markets called it a "classic air-pocket after an extraordinary run," preserving the bullish thesis. Goldman Sachs holds its 2026 year-end gold forecast at $5,400 per ounce, driven by central bank diversification and investor flows. Investors should watch Fed rhetoric, dollar strength, and ETF flows for re-entry signals amid ongoing volatility.