Gold Price Crashes From Record $5,608 to Below $4,500: What It Means for Investors

After an extraordinary rally that saw gold surge 57% in twelve months — fuelled by central bank buying, geopolitical chaos, and the “debasement trade” — the precious metal suffered its steepest fall in over a decade. The trigger: Donald Trump’s nomination of hawkish former Fed governor Kevin Warsh as the next Federal Reserve Chair.

By UK Political Finance Desk  |  Published: 2 February 2026  |  Reading time: 9 min

Gold entered February 2026 in a state of violent correction. After touching a record high of $5,608 per troy ounce on Thursday, 29 January, the precious metal collapsed by more than 20% over the following two trading sessions, falling below $4,500 by Monday, 2 February. The crash — the steepest percentage decline since March 2020 and the largest in nominal dollar terms in the metal’s history — was triggered by a single piece of news: President Donald Trump’s nomination of Kevin Warsh, a former Federal Reserve governor widely regarded as hawkish, to succeed Jerome Powell as chair of the US central bank.

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The selloff reverberated across the entire precious metals complex. Silver suffered an even more brutal decline, falling 31% on Friday alone — its worst single-day percentage drop since March 1980, when the Hunt Brothers’ infamous attempt to corner the silver market unwound. The gold-silver ratio, which had compressed from above 80:1 in early 2025 to approximately 46:1 at the peak, is now back in flux as both metals search for a floor.

Gold Price — Key Data Points (January–February 2026)

Date	Price (USD/oz)	Event
1 January 2026	~$4,330	Start of year
29 January 2026	$5,608 (record)	All-time high; 6th consecutive monthly gain
30 January 2026	~$4,900	Warsh nomination announced; massive selloff begins
31 January 2026	~$4,770	Continued decline; silver crashes 31%
2 February 2026	~$4,404	Lowest since early January; 21% off peak

What Caused the Crash?

The immediate catalyst was the Warsh nomination. Kevin Warsh, who served on the Federal Reserve Board from 2006 to 2011, is perceived by markets as significantly more hawkish than the candidates previously rumoured for the role. His appointment signals a potential shift toward tighter monetary policy, higher interest rates, and a stronger US dollar — all of which are traditionally negative for gold, which yields nothing and becomes relatively less attractive when rates rise.

But the nomination was merely the match thrown onto a pyre that had been building for months. Gold’s rally through 2025 and into January 2026 was extraordinary: a 57% gain in twelve months, the metal’s best annual performance since the early 1980s. That kind of run attracts speculative capital, and by late January, positioning in gold futures had become extremely crowded. The CME Group recorded 3,338,528 gold contracts traded on 26 January — a single-day record that shattered the previous high set in October 2025.

Factors Behind the Gold Crash

Factor	Detail	Impact
Kevin Warsh nomination	Hawkish Fed Chair pick signals tighter monetary policy	Dollar strengthens, gold loses safe-haven bid
Profit-taking	After 57% rally in 12 months, speculative longs exit	Cascading sell orders
Chinese speculator liquidation	Retail and institutional Chinese buyers take profits	Amplified selling pressure
Record positioning	CME record 3.3M contracts traded on 26 Jan	Crowded trade unwinds violently
Thin liquidity	Market lacks depth at extreme price levels	Small orders cause outsized moves
Silver contagion	Silver’s 31% crash deepens precious metals fear	Cross-asset selling

The Rally That Preceded the Crash

To understand the scale of the correction, it is necessary to understand the rally that produced it. Gold’s surge through 2025 was driven by a confluence of factors that many analysts described as a “perfect storm” for the precious metal. Central banks — led by China, India, Turkey, and Poland — bought gold at record levels throughout 2025, accelerating a de-dollarisation trend that had been building since the freezing of Russian central bank assets in 2022. The “debasement trade,” in which investors rotate out of fiat currencies and government bonds into physical assets amid concerns about surging sovereign debt, pushed institutional allocation to gold to its highest level in decades.

Geopolitical risk provided a constant tailwind. Trump’s executive orders imposing tariffs on goods from countries supplying oil to Cuba, escalating tensions with Iran over nuclear negotiations, the “Greenland situation,” and the capture of Venezuela’s president by US forces in January 2025 all contributed to what analysts described as a historically elevated level of uncertainty. Gold thrived in that environment. By the time it reached $5,608, the metal had gained 64% in 2025 alone — its second-best annual performance since 1970.

Gold’s 2025–2026 Rally — Key Milestones

Milestone	Approximate Date	Price	YoY Change
Start of 2025 rally	January 2025	~$2,650	—
$3,000 breached	March 2025	$3,000	+13%
$4,000 breached	September 2025	$4,000	+51%
Year-end 2025	December 2025	~$4,330	+64% (full year)
January 2026 peak	29 January 2026	$5,608	+57% (12-month)
Post-crash low	2 February 2026	~$4,404	-21% from peak

The Kevin Warsh Factor: What His Nomination Means

Kevin Warsh’s nomination as Federal Reserve Chair is arguably the most consequential personnel decision for global financial markets in 2026. Warsh, 55, is viewed as more hawkish than current Fed Chair Jerome Powell, whose term ends in May. Markets have interpreted the nomination as a signal that the Trump administration, despite its public rhetoric about wanting lower interest rates, has opted for a Fed leader who will prioritise dollar stability and inflation control over easy monetary conditions.

For gold, this is a fundamental headwind. Much of the metal’s 2025 rally was predicated on expectations of a sustained period of dollar weakness, loose monetary policy, and negative real interest rates. A Warsh-led Fed could reverse those conditions. Analysts at major banks have noted that while the structural case for gold — central bank buying, geopolitical risk, fiscal concerns — remains intact, the tactical environment has shifted decisively with this nomination.

Gold Price Forecasts for 2026 — Analyst Estimates

Source	Year-End 2026 Target	Key Assumption
Long Forecast	$7,291	Continued rally; geopolitical risk sustained
CoinCodex (algorithmic)	$9,004	Bullish model; +101% from current levels
JPMorgan (silver note)	Correction to $4,500–$5,000 range	Warsh tightening; profit-taking cycle
Consensus (neutral)	$5,000–$6,000	Recovery after correction; central bank demand intact

What This Means for UK Investors

For British investors, the gold crash has been partially cushioned by ongoing sterling weakness against the US dollar. In pound terms, gold remains substantially higher than it was a year ago, even after the correction. However, the volatility itself is a reminder of the risks inherent in precious metals investing, particularly at extreme price levels.

The Bank of England’s own gold reserves — held at the Bank’s vault in Threadneedle Street — are valued at market prices and have seen enormous paper gains over the past year. UK pension funds, several of which increased their gold allocations in 2025, will be watching the next few weeks closely. If gold stabilises in the $4,400–$4,600 range and resumes its upward trend, the correction will be viewed as a healthy consolidation. If it breaks below $4,000, the narrative shifts to something more concerning.

Key Support and Resistance Levels — Gold

Level	Price (USD/oz)	Significance
All-time high	$5,608	29 January 2026 record
Resistance 1	$5,000–$5,100	Pre-crash consolidation zone
Current price	~$4,404	2 February 2026
Support 1	$4,350–$4,380	Technical support zone
Support 2	$4,000	Psychological level; major floor
Support 3	$3,500	200-day moving average area

February 2026 will be a defining month for the gold market. The FOMC meeting, the political fallout from the Warsh nomination, China’s monetary policy direction, and the pace of speculative deleveraging will all play roles in determining whether the metal’s historic rally resumes or whether the correction has further to run. For now, the world’s oldest safe-haven asset is reminding investors of a lesson it teaches in every cycle: what goes up fast can come down even faster.