Gold and silver extend sell-off after historic plunge — yellow metal drops 5%

Gold and silver continued their sell-off on Monday, deepening losses since last Friday’s decline as a stronger dollar and profit taking lost momentum in the rally that had propelled precious metals to record highs a few days ago.

Spot gold lost nearly 5 percent to $4,617.07 per ounce, after falling almost 10 percent on Friday, when prices fell below $5,000 per ounce.

Silver, which rose alongside gold along with safe-haven demand and speculative inflows, remained under pressure following last Friday’s steep 30% drop, which marked the metal’s worst day since March 1980. Spot prices for the white metal fell more than 4% to $80.63 per ounce.

The pullback followed a sharp reversal on Friday, when optimism about U.S. rate cuts collided with a sudden reassessment by Federal Reserve leadership after President Donald Trump nominated former Fed Governor Kevin Warsh to replace Chairman Jerome Powell after his term ends in May, analysts said.

“As a result, the ‘Buy America’ trade is back and the independence bid that sent gold and silver to record highs of $5,600 and below $122 an ounce early Thursday morning is unraveling,” José Torres, senior economist at Interactive Brokers, said in a note Monday. he said.

Christopher Forbes, head of Asia and Middle East at CMC Markets, said gold’s sharp decline reflects a classic correction following an extraordinary rally, rather than a break in the long-term bullish thesis.

Forbes said gold’s pullback was “a classic air pocket following an extraordinary run.” “Profit-taking, a strengthening dollar and fresh geopolitical headlines from Washington have deflated the froth of a crowded trade.”

The dollar index, which measures the dollar’s strength against a range of currencies, has strengthened about 0.8% since Thursday.

A stronger dollar makes gold priced in U.S. dollars less attractive to foreign buyers, while higher interest rates make Treasuries more attractive as a safe haven, increasing the opportunity cost of holding the interest-free yellow metal.

Warsh was an advocate of tighter monetary policy, and his announcement as Fed chairman strengthened the dollar. At the same time, Trump’s statements pointing to a possible agreement with Iran seem to have eased geopolitical concerns. WTI crude oil Futures contracts fell nearly 4% on Monday.

Forbes said gold prices will remain high in the near term but will fluctuate as markets await more clarity on the direction of Warsh’s policy.

While silver prices are still up around 16 percent since the beginning of the year, gold prices have also increased by around 8 percent since the beginning of the year. Gold and silver posted record-breaking gains last year, rising nearly 65% ​​and 145% respectively.

“A renewed dollar weakening or confirmation of a dovish Warsh could bring back dip buyers,” said Forbes, who remains bullish on bullion over the long 12-month horizon, adding that the metal could return to recent highs if the Fed continues to ease while growth and inflation remain unbalanced.