Gold and silver are edging lower today as the massive trading engines in Shanghai wind down for the holiday. With China offline until February 24, global markets are asking: Can the rally survive without its biggest driver?

The China Influence

• From Physical to Speculative: China has dominated physical gold flows for a decade, but the recent “price discovery” is being driven by an explosion in Chinese derivatives and futures betting.
• Silver Squeeze: Demand in China has been so intense that domestic producers are struggling with backlogs. This has created a massive premium on Shanghai contracts compared to global prices.
• The “Holiday Rule”: Historically, metals perform well 10 days before the Lunar New Year. While some expect a dip during the break, analysts note that price support often persists even after the festivities.

Market Consolidation

• Regime Change: Strategists at OCBC suggest the “acceleration phase” is over. We are now in a consolidation regime where gains will depend on macro data rather than pure momentum.
• Volatility Check: Silver’s recent moves have been the most volatile since 1980. It currently sits about one-third below its January 29 all-time high.
• Gold Stability: Gold is holding steady above $5,000, having recovered half of its losses from the historic “rout” at the start of the month.

The $6,000 Target

• Bullish Backing: Despite the current slip, heavyweights like BNP Paribas, Goldman Sachs, and Deutsche Bank remain bullish.
• Key Drivers: Geopolitical tensions, Fed independence concerns, and the structural shift away from sovereign bonds are still very much in play.