Gold Volatility Hits Highest Level Since 2008 Financial Crisis
CME Margin Hikes and Chain of Margin Calls
Gold Volatility Soars to 44%, Surpassing Cryptocurrencies
An unusual phenomenon has occurred in the global financial market, where gold is showing greater volatility than Bitcoin. Gold and silver, traditionally regarded as safe-haven assets, have plunged sharply, triggering a chain reaction that has also impacted the cryptocurrency and stock markets.
On February 3, Yonhap News, citing Bloomberg, reported that on January 30, gold's volatility index soared to 44%, surpassing Bitcoin's 39% on the same day. This marks the highest level since the 2008 global financial crisis, and it is extremely rare for gold to be considered more unstable than cryptocurrencies. Since the advent of Bitcoin, such a reversal in volatility has occurred only twice.
An unusual phenomenon has occurred in the global financial market where gold shows greater volatility than Bitcoin. Gold and silver, traditionally regarded as safe-haven assets, have plunged sharply, causing a ripple effect that impacted the cryptocurrency and stock markets. The Asia Business Daily
'Warsh Shock' Triggers Precious Metals Panic
The backdrop to this sharp market shift is the nomination of Kevin Warsh, a former Federal Reserve Board member known for his hawkish stance, as the next Federal Reserve Chairman by President Donald Trump. Warsh had previously resigned after opposing large-scale quantitative easing, and news of his nomination has fueled concerns about monetary tightening. As a result, the value of the dollar surged, while spot and futures prices for gold and silver plummeted. On January 30 at the New York Mercantile Exchange, silver futures plunged by 31.37% in a single day, marking the largest one-day drop in 46 years. Gold futures also fell by more than 11% on the same day.
President Donald Trump has nominated Kevin Warsh, a former Federal Reserve Board member known for his hawkish stance, as the next Federal Reserve Chairman. Photo by AP Yonhap News
The shock was even greater in the domestic market. According to the Korea Exchange, several leveraged silver ETN products, which track silver futures at twice the rate, plunged by 60% in a single day. Gold and silver-related ETFs also posted double-digit losses, falling sharply in tandem. Experts analyze that consecutive margin hikes by the Chicago Mercantile Exchange (CME), combined with the plunge in precious metals, triggered a chain of margin calls and forced liquidations in highly leveraged positions. In the process, investors sold off stocks and cryptocurrencies to secure cash, spreading the shock further.
Bitcoin Also Shaken... Risk Aversion Sentiment Spreads
More than $2.5 billion worth of Bitcoin positions have been liquidated in the past few days, and the price has dropped below $80,000. The Asia Business Daily
The cryptocurrency market was no exception. In the past few days, more than $2.5 billion worth of Bitcoin positions have been liquidated, and the price has dropped below $80,000. Analysts say this situation demonstrates how sensitive the cryptocurrency market has become to risk aversion sentiment. The securities industry interprets this sharp decline as a short-term correction from overheated prices. They note that the nomination of a hawkish figure does not undermine the fundamental role of gold and silver as inflation hedges and safe-haven assets. Some experts emphasize that the recent spike in volatility is a temporary phenomenon stemming from supply-demand imbalances and deleveraging, rather than a shift in monetary policy. They predict that, in the medium to long term, the upward trend for gold and silver is likely to continue.
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