Gold futures hit a 6% lower circuit during the special trading session on Sunday, February 1, extending the sharp selloff seen across global precious metals following last week’s historic crash. On the Multi Commodity Exchange, gold futures dropped to around Rs 1,40,674 per 10 grams, locking at the lower circuit shortly after the opening bell.
The steep fall in gold mirrors the intense risk-off mood that has gripped commodity markets after gold suffered its worst single-session decline in over four decades in late January. The correction has been swift and deep, erasing weeks of gains and catching a large section of investors off guard.
Fallout from January’s historic gold crash
Gold prices had surged aggressively through January amid strong safe-haven demand, expectations of monetary easing, and heightened geopolitical uncertainty. However, once prices began to reverse, profit booking and forced liquidation accelerated the decline, leading to one of the sharpest corrections in recent history.
Dollar rebound adds pressure
A sharp rebound in the US dollar played a key role in pressuring gold prices. Strength in the dollar reduces the appeal of dollar-denominated commodities and triggered aggressive unwinding of positions built around inflation hedging and currency debasement themes.
Forced liquidation and leverage unwind
The decline was exacerbated by margin calls, algorithmic selling, and derivatives-related unwinding. As prices slipped rapidly, stop-losses were triggered across futures and options markets, intensifying downside momentum, particularly in thin liquidity conditions.
Why gold fell sharply, but less than silver
While gold declined around 9–12% during the peak of the crash, the fall was still milder than silver’s collapse. Gold markets benefit from deeper liquidity, lower leverage, and stronger institutional participation, which tend to cushion extreme price swings compared to silver.
Budget Day volatility in focus
The fall in gold prices coincides with the Union Budget 2026–27, being presented on a Sunday for the first time in India’s history. With markets open in a special session, traders remained cautious amid heightened volatility across equities, currencies, and commodities.
The takeaway
Gold’s 6% lower circuit on Budget Day reflects lingering stress from January’s historic selloff rather than a single new trigger. The episode highlights how even traditional safe-haven assets can see violent corrections when positioning becomes crowded and sentiment turns abruptly.
