The 0 Correction: Why Gold Just Plunged After Hitting Record \$5,608

Last Updated on January 30, 2026 by Deon

in the Gold Market: Bullion Falls From Stratosphere

During a month in which the “yellow metal” appeared to break the laws of physics, gravity finally asserted itself. Gold collapsed on Friday (XAU/USD), dropping over 6% to trade around $5,075 level.

Comments came 24 hours after the world had watched bullion hit an all-time high $5,600. But in the frenetic universe of global finance, yesterday’s record is today’s enterprising “sell” signal. Here’s why the parabolic rally just experienced its first major road block.

The “Warsh” Factor: A Hawkish New Era

The namesake of yesterday’s market is Kevin Warsh. A single name caused Friday’s sell-off. Trump’s selection of the former Fed governor to be Jerome Powell’s replacement has fundamentally changed market expectations.

What it means: Investors had been pricing in assertive rate cuts. But Warsh is considered a “monetary hawk” and market-friendly conservatives.

The Outcome: His nomination is a sign the Fed will be independent, and less likely to cut rates just for political reasons. This of course saw the US Dollar and Treasury yields spike, so suddenly non-yielding Gold was not looking quite so shiny.

Hotter-than-Expected Inflation (PPI)

Making matters worse, the most recent Producer Price Index (PPI) data was “hot.”

The Numbers: Wholesale inflation surged 0.5 percent in December, well above forecasts.

The Takeaway: If producer-level inflation is sticky, that gives the Fed all the more reason to stay higher for longer on interest rates. This is the “higher-for-longer” story-line that is Gold’s archenemy.

Forced Liquidation and the $5,000 Floor

When Gold is running as hot as it did this month, many traders employ high leverage to pump up gains.

The Chain Reaction: Once the price fell, these leveraged boondoggles got smacked with “margin calls.” This sparked a chain reaction of forced liquidation of longs that pushed Gold into precipitous free fall, with the metal sliding almost 8% in the European session.

The Support Line: Money managers are now honing in on the $5,000 psychological level, according to some technical analysts. If Gold can keep above this “line in the sand” perhaps the longer term continued bullish trend will keep going.

The Verdict: It’s Still a Historic Performance

Now, the day after blood was spilled on the floor, it is important to keep things in perspective. Yet with this $500 move it still stands for the best monthly gain since 1980, up some 17% already in January.

It’s not necessarily doomsday for the bulls —it’s simply a “much needed healthy reset” for an exhausted rally.