Last Updated on February 13, 2026 by Deon
For now, the global gold market is in thrall to a single potent force: the Chinese private investor. Though gold has historically been the ultimate “safe haven” when economic storms hit, analysts at Capital Economics have warned that this frenzy in China looks less like a strategic hedge and more like a classic speculative bubble.
“The indicators say it’s flashing ‘caution’ as the market goes through a volatile Feb 2026,” says commodities economist Hamad Hussain.
From Safe Haven to “Speculative Blowoff”
For many decades, Chinese families bought gold as a way to store wealth. “But all this has evolved into high-risk financial products.”
Leverage Overload: High leverage (in one case as high as 40x margin) is being used by investors in the hope that they can bet on prices heading upwards.
U.S. Treasury Secretary Scott Bessant recently called this behavior “unruly,” comparing the rapid price explosions to a “standard speculative blowoff” in which prices become completely unhinged from fundamentals.
The crisis in property: A two-headed monster
It’s the Chinese real-estate crunch that is really driving this madness. With the #1 Chinese household investment – real estate – still seeking a bottom, gold is the “last man standing.”
The Good: This structural change puts in place a permanent “floor” under demand for gold.
The Bad: Everybody Is Piled Into the Same Trade, So the Market Is ‘Top-Heavy.’ During a sell-off (such as the one that occurred on Jan. 31), massive margin calls are made and investors are forced to instantly liquidate their positions.
Extreme Volatility: The “January Jolt”
We know what happens when this bubble encounters a pin. In January 2026 gold and silver also set eight consecutive record highs, only to lose all of the month’s gains in half a day just before month-end down day.
The Trigger: The nomination of a hawkish Fed Chair and increasing U.S. margin requirements rippled through leveraged Chinese platforms.
The Arbitrage Gap: At the peak of the frenzy, spot gold in Shenzhen was fetching a huge premium over London prices, indicating rampant hoarding of physical metal that futures exchanges couldn’t supply.
The “Lunar New Year” Lull
We’re heading into mid-February and a seasonal element is further clouding the outlook:
Pulling Liquidity: Ahead of the Chinese New Year (Feb 15–23) many local traders are in close mode.
Market Thinness: No giant volume Chinese buying to defend the price so gold is now more sensitive to US economic numbers (such as this morning’s cooling inflation report).
China Gold Market: Important Signs (Feb 2026)
IndicatorStatusMarket ImpactGold ETF InflowsRecord amountsETF gold holdings doubledCommodities And Precious MetalsSlides downRETAIL MENTIONS Below Average36 MONTHE Gold slide_regression_of_retail_investment to $80/% from below pattern. Leverage RatiosUp to 40x”The risk of ‘flash crashes’ because these products have forced liquidations. SHFE Volume72%parity avgSpeculation driving price, not jewelry. Property Market5th Year products into gold, creating ‘crowded trade’ dangers.
The Bottom Line
Though the long-term story for gold is firm—based on central bank purchasing and global debt—the “China Factor” has added a degree of uncertainty unseen in 30 years. And as a warning from Capital Economics reminds, the increased leverage “suggests we should expect more ‘episodes of extreme volatility’ from 2026 on.
