Gold and silver prices have plunged, as a “meltdown” in the metals market deepened and rattled stock exchanges around the world.
Gold prices tumbled by 8% to $4,465 an ounce on Monday, ending a run of record highs that took it to nearly $5,600 just last week, before recovering some ground. Silver fell by 7%, after a 30% slump on Friday.
Both metals had hit successive highs in recent weeks, as investors sought safe haven assets amid rising geopolitical tensions and fears around the independence of the US Federal Reserve.
Donald Trump triggered the sell-off on Friday, after he said he would nominate Kevin Warsh, a former Fed governor and respected central banker, to be the next chair of the Federal Reserve.
Warsh will succeed Jerome Powell when his term ends in May, if confirmed by the Senate. Trump said on Friday that he had not asked Warsh to commit to rate cuts.
Susannah Streeter, of the broker Wealth Club, said the metals sell-off reflected relief that a “Trump cheerleader” would not be installed at the central bank.
“Now financial industry heavyweight Kevin Warsh has been anointed as successor, with deep Fed experience, he’s not expected to be a pushover and that’s sparked this big reversal of safe-haven positions,” she said.
Michael Brown, senior research strategist at Pepperstone, described Friday’s sell-off as a “meltdown in the metals space”.
The price of industrial metals, which had swept up in the metals rally, also dropped on Monday, with platinum and copper down 10% and 9%, respectively.
The sell-off reverberated across global stock markets too. Futures tracking America’s S&P 500 and the Nasdaq pointed to a loss of 0.9% and 1.2%.
In the UK, the blue-chip FTSE 100 index slipped by 0.4% in early trading, led by losses in precious metal miners Endeavour Mining, Fresnillo and Antofagasta, which all fell by more than 5% early on. The pan-European STOXX 600 index slipped by 0.4%.
Meanwhile, the price of bitcoin dropped by 9% over the weekend, falling below $76,000 and now down by about 40% from its peak of $125,000 last year.
Oil prices fell by 5%, as investors watched signs of geopolitical tensions easing between the US and Iran. Brent crude traded at about $64.80 a barrel, down from highs of about $71 last week.
The US dollar, which slumped in the second half of January, rose by 0.16% against a basket of rival currencies.
While gold and silver prices are falling sharply, analysts at Deutsche Bank said on Monday that they still expect the metal to hit $6,000 this year.
Mohit Kumar, of the broker Jefferies, said the gold sell-off looked like “an unwind” of a “crowded” trade.
“Gold was one of the most crowded positions with positioning reaching close to 8 [on a scale of -10 to 10] on our indices last week,” he said. “Last two days’ move has taken the positioning to just above four. Still on the long side but much less crowded suggesting that the bulk of weaker hands have been cleaned out.”
Even with sharp falls in recent days, gold is still up by about 65% compared with this time last year, while silver is up by more than 120%.
