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For Merry Chen, a 42-year-old homemaker in Hangzhou, the foray into precious metals lasted less than a week. With no prior experience in derivatives, Chen opened a futures account last Monday on the advice of friends.

The initial results were promising: she gained 60% on her 1 million yuan ($144,000) investment in just 48 hours. But Friday’s sharp drop wiped out those gains and triggered a forced liquidation, leaving her with a 750,000 yuan loss, down 84% from the peak.

“I never imagined it could be this intense,” said Chen, who plans to close her account. “It felt like a trip to a casino in Macau.”

Chen’s losses are emblematic of speculators who had piled into precious metals before the Friday crash triggered widespread losses and forced liquidations of leveraged futures positions. While part of the trigger was the nomination of Kevin Warsh to lead the US Federal Reserve, which sent the dollar higher, many had long warned the metals markets were too overstretched.

Spot gold fell as much as 10% on Monday, and is down almost a fifth from an all-time high. Silver plunged as much as 16%, following a record intraday loss in the previous session..

The sharp reversal gave trend-following commodity trading advisor models at Chinese quantitative hedge funds — which typically hold commodities for 3 to 20 days — scarcely any time to adjust, according to Lv Chengtao, a partner at SHQX Asset Management. That came as non-ferrous and energy futures have also retreated, he said.

As a result, many CTA managers’ net asset values would likely have been under pressure Friday and Monday, he said.

Since such CTA holdings are often spread across a wide array of commodities and their leverage is typically lower than 300%, the drawdowns since Friday have been controllable so far, sparing most of them from forced liquidations, he said.

Still, some such funds suffered drawdowns of more than 10%, according to an executive with a Shanghai-based quantitative fund, whose firm cut most of its precious-metal futures positions last week to limit losses. He asked not be named discussing a private matter.

The decline is coming ahead of the Lunar New Year holiday, when CTAs tend to cut positions by 30%-50% to reduce risks because offshore trading continues during the week-long break, and that process of reductions has started already, according to a Shanghai-based quant fund.

Chinese banks also took measures last week to limit risks for retail investors in gold-accumulation products. Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp. were among those that plan to either raise the minimum deposit amount or implement quota controls.

The gold rally has been building for a number of years as central banks expanded their holdings as an alternative to the dollar. It accelerated in 2025 as global investors piled into the so-called debasement trade. Chinese speculators, including individual investors and large funds venturing into commodities, added more fuel to the gains in recent weeks.

One of China’s most well-know investors exited the trade in December. Shanghai Banxia Investment Management Center, a macro hedge fund managing more than 5 billion yuan, sold all its gold holdings in December, even as the asset is expected to hover at elevated levels rather than falling significantly, according to founder Li Bei.

Central banks including Russia’s have been selling gold, and the metal’s price is overvalued compared to its long-term equilibrium level, she said in an interview with the Securities Times’ Wechat account late last month. The opportunity costs of holding gold are very high, she said, citing a potential bull run of Chinese blue chip stocks.

With concerns over the independence of the Fed and geopolitical unrest from Venezuela to Iran making headlines, the gains in metals had become a symbol of growing distrust among investors in the US dollar.

“There’s a simple logic to it,” said Jeff, a freelance investor from Hangzhou who said his holdings of spot and physical gold accumulated over the years are now worth about $1.5 million. “The world is chaotic, so buy some gold.”

He was cautious enough not to trade leveraged gold futures, and felt even more convinced after his escape before silver’s record plunge on Friday. He invested about $500,000 in silver futures contracts and dumped all at $110 an ounce last week, yielding a 100% return.

Now, he’s looking for an opportunity to buy in for the long run, betting demand for precious metals will be underpinned by prospects of a weaker dollar, the China-US rivalry, as well as developments in artificial intelligence. Beyond Comprehension

Charles Wang, a fund manager in Shanghai, is looking at gold stock exchange-traded funds for buying opportunities. He personally invested about 3 million yuan in gold futures earlier, with three-times leverage, before selling his holding at around $3,500 an ounce and making a 30% return.

“I couldn’t wrap my head around it, so I decided to sell,” Wang said.

He bought some gold stock ETFs on Monday for products he manages, and he can gauge gold miners’ earnings prospects based on average metal prices of the past year rather than fixating on short-term price swings of the commodity.

More are adopting a cautious approach. Lu, who runs a 200 million yuan CTA fund in China, said that before the recent rally in gold, his fund gradually liquidated its positions.

“Anything above $4,800 is beyond my comprehension, hence not money I should earn,” said Lu, who asked that only his last name be used. “I’m in no hurry to jump in the market. It’s still a gambling-driven market right now, not an investment-oriented one.”