Why Gold Prices Are Dropping During the Lunar New Year?
Liquidity dries up as the Year of the Horse begins, leaving bullion exposed to a sharp correction while analysts double down on $5,000 targets.
Silence might be golden, but right now, the silence coming from Asian markets is proving quite heavy for precious metals. Gold Prices stumbled below the psychological $4,900 mark on Tuesday, a descent driven less by fundamental weakness and more by the distinct lack of buyers in the world’s largest consuming region. With China and much of Asia shuttered for the Lunar New Year festivities, liquidity evaporated, leaving the bullion market prone to the kind of volatility usually reserved for penny stocks.
Spot gold fell as much as 3% intraday, hitting its lowest level in over a week. This wasn't an isolated incident but rather a continuation of the erratic behavior seen since late January. After a blistering rally that saw the metal peak above $5,595 an ounce, gravity took hold with a vengeance, snapping prices back to near $4,400 in just two days. While the metal has since clawed back some dignity, the current trading environment remains as jittery as a caffeinated day trader.
Silver, ever the dramatic sibling, took an even harder hit. The white metal plunged as much as 5.4% before paring some losses, a move that highlights its notorious lack of liquidity compared to its yellow counterpart. The recent swings in silver are the most violent seen since 1980, standing out for both their sheer scale and breathless speed.
Despite the current swoon, the long-term bulls aren't retreating to their caves just yet. Major financial heavyweights, including BNP, Deutsche Bank, and Goldman Sachs, remain steadfast in their belief that the upward trend will resume. The logic is simple: the macroeconomic boogeymen of inflation and dollar debasement haven't gone anywhere.
Analysts at Jefferies underscored this sentiment in a recent note, hiking their 2026 price forecast to $5,000 an ounce, up significantly from their previous $4,200 target. According to the firm, investors and central banks worried about currency stability have "only really one option: hard assets."
Reinforcing this view is the insatiable appetite for physical metal in India. While Chinese markets are currently quiet, Indian import data through January paints a picture of a gold rush. The country imported more than $12 billion worth of gold in January alone, the third-highest monthly total on record, while silver imports surged past $2 billion.
For now, all eyes turn to the United States. With U.S. markets reopening Tuesday after the Presidents’ Day holiday, traders are bracing for the release of the Federal Reserve’s January meeting minutes on Wednesday. Following Friday’s slower-than-expected inflation print, the minutes will offer a crucial fresh read on the economy and the likely path of interest rates. Until then, gold remains in a precarious dance, waiting for the party in Asia to restart.