Quick overview

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Prices for everything from gold to copper and tin appeared to defy supply/demand fundamentals because of a surge of hot money from Chinese speculators, leaving traders in the metals market glued to screens.

The rally then turned into one of the most spectacular crashes in commodity market history in a matter of hours. Gold fell 9 percent on its worst day in over ten years, while silver saw its largest-ever 26 percent decline on Friday. After an abrupt surge above $14,500 per ton that quickly collapsed, copper traders were already in shock.

Many had warned that the metals markets were overstretched and ready for a correction after weeks of unrelenting surges. News that US President Donald Trump intended to nominate Kevin Warsh to lead the Federal Reserve was the catalyst for Friday’s crash, sending the dollar higher. Even so, the magnitude and speed of the decline were astounding, especially for a market as big and liquid as gold.

Unwilling to miss the Asian trading day, when many of the biggest moves have occurred, metals traders in the US and Europe have been working nonstop. They have even been frantically trading via long-distance flights. Executives watched in silence as the crisis developed while staring at their phones at the largest coin conference in the world, held in Germany last week.

However, in recent weeks, the gains have accelerated due to a surge in purchases by Chinese speculators, ranging from individual investors to large equity funds entering the commodities market. This has caused metals like copper and silver to reach all-time highs. Trend-following commodity trading advisors poured in as prices skyrocketed, intensifying the rally.

The increase in metals became a symbol of some investors’ growing mistrust of the US dollar as worries about the Fed’s independence and geopolitical conflicts from Iran to Venezuela dominated the news. Gold and silver fever swept consumers from China to Germany as the metals’ upward momentum attracted more buyers.

The scenes were reminiscent of 1979–1980, the only other period in modern history when the markets saw such sharp price swings.