03.02.26 - Calm after the storm
After last Friday’s violent sell-off, markets are showing signs of stabilization. Metal prices have started to recover part of their heavy losses, while volatility has eased.
Additional news and positioning data are emerging, helping to explain the magnitude of the move and why the pressure may now be fading.
Reports and market talk suggest that the market was hit by an unusually large sell order on the last trading day of the month — a moment when liquidity is often thinner and positioning adjustments are common.
While this cannot be fully verified, rumors indicate that some large institutional players with open short positions had moved deeply into negative territory earlier in the month. As prices surged, pressure on these positions increased. In such situations, aggressive selling can be used to push prices lower, stabilizing short exposure and triggering technical reactions.
Once prices started to fall rapidly, mechanical forces took over:
Speculative and leveraged long positions were forced to sell as margin calls were triggered
Stop-loss levels were hit across futures and derivative markets
ETFs and structured products experienced outflows, adding further supply
This created a self-reinforcing downward spiral: falling prices led to forced selling, which pushed prices even lower — largely independent of fundamentals.
Markets:
Commodities: Precious metals rebound from deeply oversold levels
Equities: Broader equity markets are calmer, though sentiment remains fragile and highly headline-driven.
Bonds: Yields continue to move higher
Currencies: The US dollar stabilized after recent volatility, while safe-haven flows continues
Cryptos: continued pressure from derisking with Bitcoin below USD 78k
My View:
Was I surprised by the correction? No.
Was I surprised by the magnitude of the correction? To some extent, yes.
As stated in my earlier publications, I was no longer recommending to jump onto the fast-moving train, as speculative positioning had reached unusually elevated levels. In such an environment, both the timing and the size of market moves become highly unpredictable.
That is exactly what we experienced.
While the trigger and the scale of the sell-off could not be forecast, the underlying risk was clearly visible. In hindsight, the recommendation to stay patient and wait for a better entry point proved to be the right approach.
Speculative markets rarely end in a smooth adjustment — they tend to correct fast, deep, and emotionally.
The latest move has many characteristics of a positioning-driven flush rather than a structural trend reversal.
Large speculative positions were likely washed out during the sell-off.
Short-term traders and leveraged players appear to have reduced exposure aggressively.
With this positioning reset, short covering may now add support to metal prices.
This is why I shared a buying opportunity for metals yesterday. The underlying narrative has not fundamentally changed. Most of the arguments supporting higher metal prices remain intact: structural demand, geopolitical uncertainty, and diversification needs in portfolios, supported also by a weakening US dollar and re-positioning from cryptos into precious metals.
That said, the broader environment for other asset classes remains fragile.
Uncertainty is still elevated:
Geopolitical tensions remain unresolved.
Bond yields are high and sensitive to inflation surprises.
Signs of re-inflation are reappearing.
This morning’s rate hike by the RBA (Royal Bank of Australia) underlines that the global fight against inflation is not over and re-inflation could emerge. Other central banks could follow if price pressures persist — with one notable exception: the SNB, where a very strong Swiss franc continues to act as a tightening force on its own.
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