Gold and silver experience significant declines. What should investors do now?

On the evening of January 30, 2026, the precious metals market staged an "epic plunge": gold plummeted over 12% in a single day (the largest decline in nearly 40 years), silver once tumbled 36% (breaking historical records), causing many leveraged investors to be forced to liquidate, and the market plunged into panic. In the face of this extreme volatility, what investors need most is not blind bottom-fishing or cutting losses, but rational judgment and actionable strategies based on the market's fundamental nature. This article provides a comprehensive action guide from five dimensions: causes of the plunge, trend analysis, layered response plans, risk control, and long-term allocation for different types of investors.

1. The Truth of the Plunge: Short-term Emotional Release, Not a Reversal of Long-term Logic

This plunge is not the end of the precious metals bull market, but a "massive emotional stampede" caused by multiple short-term factors stacking up:

1. Profit-taking pressure: After gold hit a historic high of $5,598, large accumulated profit positions were closed en masse, algorithmic trading followed suit, creating a vicious cycle of "selling—decline—stop-loss—more selling."

2. Sudden change in policy expectations: The Trump administration nominated a hawkish candidate, Kevin Warsh, as Federal Reserve Chair, sharply cooling expectations of 2-3 rate cuts in 2026. The prolonged high-interest-rate environment boosted the dollar index and U.S. Treasury yields, suppressing non-yielding precious metals.

3. Leverage liquidation: Recent margin increases by CME, Shanghai Futures Exchange, and others forced highly leveraged traders (5-40x) to be forcibly liquidated under daily volatility over 10%, further amplifying the decline.

4. Technical breakdown: Gold broke below the key support of $5,200, triggering many stop-loss orders; silver broke below the psychological level of $80/oz, accelerating panic selling.

The core long- and medium-term logic remains unchanged: global central banks continue to increase gold holdings (net purchase of 1,136 tons in 2025, China has increased holdings for 14 consecutive months), the de-dollarization trend is solid; the U.S. fiscal deficit remains high, with debt surpassing $45 trillion, putting long-term pressure on the dollar's credit; industrial demand for silver (annual growth of 35% in photovoltaic installations) continues to grow, supporting its long-term value.

2. Trend Analysis: Short-term Bottom-finding, Medium-term Recovery, Long-term Optimism

• Short-term (1-4 weeks): Market panic has not fully released, and further declines are possible. Focus on support levels of $4,700-4,800/oz for gold (corresponding to about ¥1040/gram in domestic gold T+D), and $70-75/oz for silver. If broken below $4,700, a new round of stop-losses may be triggered, with a target of $4,500; if stabilized and rebounding, $5,100-5,200 will be strong resistance.

• Medium-term (3-6 months): Expectations for Fed policy will gradually clarify, market sentiment will recover, and gold prices are likely to oscillate back to $5,000-5,500, awaiting the start of rate cut cycles. Silver has greater elasticity, with a recovery potentially exceeding gold, but also more volatility.

• Long-term (1-3 years): Against the backdrop of weakening dollar credit, complex geopolitical situations worldwide, and central banks normalizing gold purchases, the bull market in precious metals remains intact. Gold may challenge $6,000, and silver could reach $120/oz.

3. Layered Response Plans: Precise Strategies Based on Position Types

(1) High-leverage traders (futures, T+D, contracts): Prioritize survival, stop-loss is king

• Execute immediate stop-loss: limit single-loss to 1-2% of total funds (e.g., for a ¥100,000 account, max loss ¥2,000); technical stop-loss: exit unconditionally if gold falls below $4,700/oz or silver below $70/oz; domestically, gold T+D below ¥1040/gram, silver T+D below ¥22,000/kilogram.

• Decisively reduce leverage: During this plunge, a 5x leverage with a 10% drop results in a 50% loss; 10x leverage could wipe out the principal. Ordinary investors should stay away from leverage above 5x; during high volatility, reduce to 1x (no leverage).

• Avoid bottom-fishing for rebounds: Current market sentiment is extreme; rebounds may be traps, with high chances of further declines. Wait for stabilization signals (three consecutive days without new lows, shrinking trading volume, ETF fund inflows) before lightly testing with no more than 30% position.

(2) Physical precious metals holders (bars, coins, investment gold): Stay flat and observe, add gradually

• Do not panic or cut losses in the short term: The core logic of physical gold is its opposition to fiat currency; this volatility does not shake its essence. If holding for inflation hedge, asset diversification, or inheritance, short-term price fluctuations need not be overreacted to.

• Add gradually after stabilization: If physical holdings account for less than 5% of total assets, consider increasing positions when gold drops 5-8% (e.g., to $4,800 or $4,500), or silver drops 10-15% (e.g., to $75 or $65). Each addition should not exceed 10% of total allocation funds, smoothing costs.

• Choose reputable channels: Prefer bank investment gold bars (premium ≤5%), avoid branded jewelry (premium 30%+, high liquidity cost); for silver, pay attention to storage safety and liquidity.

(3) Moderate- and low-risk tool investors (gold ETFs, silver ETFs, accumulated gold, paper gold): Hold and observe, trade in swings

• For high-cost buyers (cost > $5,200): Sell 30-50% in stages when rebounding to $5,100-5,200 to reduce risk; if prices continue to fall, break below $4,700/oz, sell another 20%, keeping 50% core position for observation.

• For low-cost buyers (cost < $5,000): No need to cut losses; hold and wait for market recovery; if position is low (<5% of total assets), add in stages below $4,800, with each addition not exceeding 1% of total assets.

• Silver ETF investors: Silver is more volatile; consider light testing below $70, with stop-loss at $65; take profits in stages above $80, avoid long-term holding.

(4) Gold and silver stocks/funds: Avoid short-term volatility, select leading stocks

• Short-term reduction for risk hedging: Precious metal stocks are 3-5 times more volatile than spot; some gold stocks fell over 20% in a single day during this plunge. Reduce holdings to below 30% temporarily, wait for stabilization.

• Medium- and long-term picks: Focus on leading companies with resource advantages, strong cost control, and stable performance, such as Zijin Mining, Shandong Gold, Silver Mountain Gold; for gold-themed funds, prioritize ETFs tracking closely with low fees.

• Bottom-fishing timing: Wait until gold spot stabilizes, trading volume shrinks, and sector sentiment recovers before selectively entering; do not rush to bottom-fish.

4. Ironclad Risk Control Rules: Avoid becoming market casualties

(1) Position control: Strictly adhere to allocation limits

• Gold: 5%-10% of household liquid assets; during high volatility, reduce to below 5%; beginners start at 2-3%, gradually increase to 5%.

• Silver: More volatile, allocation ≤3%; invest only with spare funds, not affecting daily life or emergency funds.

• Dynamic rebalancing: Use a "fixed ratio allocation method"—when gold exceeds 10%, sell part to reach target ratio; below 5%, buy to reach target. For example, with total assets of ¥1 million, target gold is 5% (¥50,000). If gold price rises to ¥70,000 (7%), sell ¥20,000; if drops to ¥30,000 (3%), buy ¥20,000.

(2) Tool selection: Avoid black platforms, prefer low-risk channels

• Conservative options: Gold ETFs (fees <0.5%, tracking close, good liquidity), bank savings gold (low minimum, supports regular investment), bank investment gold bars (formal channels, low premium).

• Silver options: Silver ETFs, silver LOF; avoid high-leverage trading like silver T+D.

• Absolute avoid: Offshore spot, OTC financing, virtual trading platforms, entrusted wealth management—these are often scams with no fund safety.

(3) Trading discipline: Overcome emotional trading, stick to quantitative methods

• Dollar-cost averaging: Invest a fixed amount on a fixed date each month (e.g., ¥1,000), ignoring short-term fluctuations, smoothing purchase costs over time, avoiding buying at high points.

• Pre-set stop-loss and take-profit: Before each trade, define stop-loss (e.g., 8%) and take-profit (e.g., 15%) levels; strictly execute without luck-based exceptions.

• Avoid frequent trading: Short-term volatility in precious metals is intense; frequent buying and selling can chase highs and sell lows, increasing costs and losses. Long-term holding (6-12 months) is more suitable for ordinary investors.

5. Long-term Allocation Value: Precious metals as the "stabilizer" of asset portfolios

(1) Anti-inflation attribute: Long-term outperforming fiat currency depreciation

Gold, as a "hard currency," has historically outperformed inflation over the long run. Since the collapse of the Bretton Woods system in 1971, gold has risen from $35/oz to $4,800/oz in 2026, with an annualized return of about 7.5%, far exceeding the U.S. dollar inflation rate of about 3.2% per year. Silver, with both commodity and monetary attributes, supported by industrial demand, has an annualized long-term return of about 8.2%. In the current environment of persistent global easing and weakening dollar credit, the anti-inflation value of precious metals will be further highlighted.

(2) Asset diversification: Reduce portfolio volatility

Precious metals have low correlation with stocks and bonds, and can even be negatively correlated during crises. For example, during the 2020 pandemic, global stocks plunged 30-50%, while gold rose 25%; in 2022, aggressive Fed rate hikes caused bond markets to crash, but gold remained relatively stable. Allocating 5%-10% of assets to gold can effectively reduce overall portfolio volatility and improve risk-adjusted returns.

(3) Geopolitical hedging: Modern interpretation of "hiding gold in troubled times"

Current global geopolitical conflicts (Russia-Ukraine, Middle East, Taiwan Strait issues, etc.) increase risk premiums. Gold, as a "borderless currency," becomes a safe haven during political turmoil and exchange rate fluctuations. In 2025, global central banks net purchased 1,136 tons of gold, a record high, with countries like China, India, and Turkey increasing holdings continuously, driven by concerns over geopolitical risks and de-dollarization strategies.

(4) Silver’s dual value: Industrial demand + monetary attributes

Silver is not only a precious metal but also an important industrial raw material, with demand in photovoltaics, electronics, medical fields, etc., growing steadily. In 2025, global photovoltaic installations increased by 35%, pushing silver industrial demand to a record high, accounting for over 60% of total demand. Meanwhile, silver’s monetary properties benefit from de-dollarization trends, and its long-term value is undervalued. The current gold-silver ratio (gold price divided by silver price) is about 65, with a historical average of around 50, indicating potential valuation correction space for silver.

The sharp decline in gold and silver is a short-term emotional release, not a reversal of the long-term trend. Investors should view market fluctuations rationally, avoid emotional trading: high-leverage traders should prioritize stop-loss and deleverage; physical holders can stay flat and observe, adding gradually after stabilization; ETF and paper gold investors should control positions and trade in swings; stock investors should reduce positions temporarily to hedge risks, and select leading stocks for medium- and long-term investment. In the long run, precious metals serve as tools for inflation hedging, portfolio diversification, and geopolitical risk mitigation, and should occupy 5%-10% of household assets, using dollar-cost averaging or fixed-ratio rebalancing strategies to navigate market fluctuations and achieve long-term asset preservation and appreciation.