Gold prices experienced their steepest weekly decline since 2013, plummeting 9% last week after Chinese authorities imposed stricter margin requirements on leveraged gold trading. U.S. Treasury Secretary Scott Bessent characterized the dramatic sell-off as a "classical, speculative blowoff" triggered by China's regulatory adjustments.
The crash saw gold fall from a prior peak of nearly $5,091 per troy ounce, forcing widespread liquidations. The move resulted in significant outflows from Chinese gold exchange-traded funds (ETFs), with approximately 980 million yuan exiting these investment vehicles.
Secretary Bessent, commenting on the situation, stated, "Things have gotten a little unruly in China. They're having to tighten margin requirements. So gold looks to me kind of like a classical, speculative blowoff." The regulatory action by China, one of the world's largest gold markets, was designed to curb excessive speculation, distinct from fundamental demand drivers like central bank purchases.
Market analysts have drawn parallels to the 2013 gold decline, which was also precipitated by regulatory constraints. Such policy shifts historically lead to rapid market corrections by constraining liquidity and influencing leveraged investor behavior. While the event highlights the volatile interplay between financial policies and commodity markets, major cryptocurrencies like Bitcoin and Ethereum showed no immediate impact from the gold market turmoil, maintaining stability amid the precious metal's fluctuations.
Experts note that institutional demand for gold remains robust, suggesting potential for market recalibration and recovery. The broader financial implications include pressure on commodities from a strengthening U.S. dollar, with the event signaling potential repercussions for global gold trade dynamics.
