Gold Retreats to $4,850 After Historic Sell-Off as Warsh Fed Nomination Reshapes Outlook
This is part of The Rio Times’ daily coverage of precious metals markets and Latin American financial markets.
Gold prices found fragile footing near $4,850 per ounce on Thursday, February 6, 2026, as investors attempted to recalibrate positioning following one of the most dramatic corrections in precious metals history.
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\nThe yellow metal remains down approximately 13% from its all-time high of $5,589.38 reached on January 28, when escalating U.S.-Iran tensions and inflation hedging drove bullion to record territory.
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\nThe “Warsh Shock” of late January—when President Donald Trump nominated Kevin Warsh as the next Federal Reserve chair—triggered a cascading liquidation that erased more than $1,000 per ounce in a matter of days, marking gold’s largest single-day decline since 2013.
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Key Market Data
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| Indicator | Value | Change |
|---|---|---|
| Spot Gold (XAU/USD) | $4,852.17 | +1.54% (daily) |
| All-Time High (Jan 28) | $5,589.38 | -13.2% from ATH |
| YTD Performance | +7.1% | vs. +69.7% YoY |
| Gold Futures (Feb 26) | $4,848.55 | +0.05% |
| US Dollar Index (DXY) | +0.09% | Slight strength |
| Fed Funds Rate | 3.50-3.75% | Unchanged |
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Performance Analysis
\nThe gold market is navigating what analysts have termed the “February Massacre,” a violent unwinding of speculative positions that had pushed the precious metal to unsustainable heights.
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\nAfter surging nearly 20% in the first four weeks of 2026—its best start to a year since 1980—gold experienced a breathtaking reversal that wiped out approximately $2 trillion in market capitalization across the precious metals complex.
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\nThe correction began in earnest on January 31 when Trump’s Warsh nomination boosted the U.S. dollar and reinforced expectations of a more hawkish monetary policy stance.
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\nBy the time markets closed on February 2, gold had plunged to the $4,400-$4,600 range, down from its peak above $5,500.
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\nThe selling was exacerbated by CME Group raising margin requirements on COMEX gold futures after the historic volatility, forcing leveraged traders to liquidate positions.
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\nHowever, the past three sessions have seen “buying the dip” activity emerge, with gold clawing back toward the $4,850-$4,900 zone as fundamental supports reassert themselves.
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\nThe one-year gain remains impressive at nearly 70%, underscoring the structural bull case that propelled gold higher throughout 2025.
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Key Drivers
\nThe nomination of Kevin Warsh as Federal Reserve chair proved to be the immediate catalyst for gold’s correction, fundamentally altering market expectations for monetary policy.
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\nWarsh, who served on the Fed board from 2006 to 2011, is perceived as more hawkish on the central bank’s balance sheet and less inclined toward aggressive rate cuts.
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\nThis perception strengthened the dollar and raised the opportunity cost of holding non-yielding assets like gold. Markets are now pricing a slower pace of potential rate cuts, with the first move anticipated in June rather than earlier in the year.
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\nGeopolitical tensions continue to provide a floor for prices. U.S.-Iran relations remain fraught despite planned nuclear talks in Oman, with the U.S. military shooting down an Iranian drone that approached the USS Abraham Lincoln aircraft carrier earlier this week.
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\nPresident Trump has kept military options on the table while expressing preference for diplomatic solutions. Central bank demand remains another crucial support, with purchases averaging approximately 60 tonnes monthly—more than triple the pre-2022 average of 17 tonnes.
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\nChina, Poland, and emerging market central banks continue diversifying reserves away from dollar-denominated assets, part of a broader de-dollarization trend that shows no signs of abating.
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Technical Outlook
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| Level Type | Price | Significance |
|---|---|---|
| Resistance 1 | $4,937 | Bull Flag breakout zone |
| Resistance 2 | $5,094-$5,056 | Strong resistance area |
| Resistance 3 | $5,208 | Pattern target |
| Current Price | $4,852 | — |
| Support 1 | $4,782 | 61.8% Fibonacci level |
| Support 2 | $4,700-$4,655 | Target Zone 2 |
| Support 3 | $4,390 | Recent correction low |
\nTechnical indicators paint a mixed picture following the violent sell-off. A Bull Flag pattern is forming on the daily chart, with a potential breakout near $4,937 targeting $5,208 and above.
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\nHowever, Bearish Marubozu and Bearish Counterattack patterns within the $4,937-$5,052 range signal that selling pressure persists.
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\nThe RSI has recovered from oversold territory toward 45, suggesting the heaviest selling has eased, while MACD remains in positive territory but is declining toward the zero line, indicating weakening bullish momentum.
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Analyst Perspectives
\n”Gold’s thematic drivers remain positive and we believe investors’ rationale for gold allocations will not have changed,” noted strategists at Deutsche Bank.
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\n”The conditions do not appear primed for a sustained reversal in gold prices, and we draw some contrasts between today’s circumstance and the context for gold’s weakness in the 1980s and 2013.”
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\nAt UBS, analysts maintain a bullish stance despite the volatility, projecting gold could reach $6,200 per ounce by mid-2026, representing nearly 25% upside from current levels.
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\n”We rate gold as an attractive hedge and suggest that the bull market is not yet over,” the firm stated in a recent note. J.P. Morgan forecasts year-end prices near $5,000, supported by quarterly investor and central bank demand averaging 585 tonnes.
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\nGoldman Sachs recently lifted its December 2026 target to $5,400, arguing that hedges against global macro and policy risks have become “sticky.”
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Looking Ahead
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| Date | Event |
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| February 6 | January Employment Report; Michigan Inflation Expectations |
| February 6 | US-Iran Nuclear Talks in Oman |
| February 11 | US Consumer Price Index (CPI) for January |
| February 20 | US Q4 GDP; Manufacturing and Services PMI |
| TBD | Warsh Senate Confirmation Hearings |
\nThe gold market enters a critical juncture as investors balance the structural bullish case—central bank buying, de-dollarization, and geopolitical hedging—against the prospect of a more hawkish Fed under Warsh’s leadership.
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\nFriday’s January employment report and upcoming CPI data will provide crucial signals on the inflation trajectory and rate-cut timing, while the outcome of U.S.-Iran negotiations in Oman could trigger renewed safe-haven flows if tensions escalate.
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\nDisclaimer: This report is for informational purposes only and does not constitute investment advice. Gold prices are highly volatile and past performance does not guarantee future results. Consult a qualified financial advisor before making investment decisions.
Related coverage: Brazil’s Ibovespa | Brazil’s Morning Call
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