Plunge in price of gold and silver rattles global stock markets | Gold
Gold and silver prices fell as the “melt-up” in the metals market deepened and shook stock markets around the world.
Gold prices fell 8 percent on Monday to $4,465 an ounce, ending last week’s record highs of nearly $5,600 and showing some recovery. Silver is down 7%, following a 30% drop on Friday.
Both metals have hit consecutive highs in recent weeks as investors seek safe-haven assets amid rising geopolitical tensions and fears about the independence of the US Federal Reserve.
Donald Trump triggered the selloff after he said Friday that he would nominate former Fed governor and respected central banker Kevin Warsh to be the next chairman of the Fed.
If confirmed by the Senate, Warsh would replace Jerome Powell when his term ends in May. Trump said Friday that he did not ask Warsh to commit to a rate cut.
Susannah Streeter, of broker Wealth Club, said the sell-off in metals reflected relief that a “Trump cheerleader” would not be deployed at the central bank.
“Now that financial industry heavyweight Kevin Warsh has been appointed as his successor, with his deep Fed experience, he is not expected to be a driving force, leading to a major reversal of safe-haven positions,” he said.
Michael Brown, Pepperstone’s senior research strategist, called Friday’s selloff “a meltdown in the metals market.”
The prices of industrial metals, which rose with the rise in metals, also fell on Monday; platinum and copper fell 10% and 9% respectively.
The sales were also reflected in world stock markets. Futures tracking America’s S&P 500 and Nasdaq indexes pointed to losses of 0.9% and 1.2%.
The UK’s blue-chip FTSE 100 index fell 0.4% in early trading as precious metals miners Endeavor Mining, Fresnillo and Antofagasta initially fell more than 5%. The pan-European STOXX 600 index fell 0.4 percent.
Meanwhile, the Bitcoin price fell 9% over the weekend, falling below $76,000 and is now down nearly 40% from last year’s peak of $125,000.
Oil prices fell 5% as investors watched for signs that geopolitical tensions between the United States and Iran are easing. Brent crude traded at around $64.80 a barrel, down from last week’s peaks of $71.
The US dollar, which lost value in the second half of January, gained 0.16% against rival currencies.
While gold and silver prices have fallen sharply, analysts at Deutsche Bank said on Monday they still expect the metal to hit $6,000 this year.
Mohit Kumar of broker Jefferies said the gold sell-off appeared to be an “unwinding” of a “crowded” trade.
“Gold was one of the most crowded positions with positioning approaching 8. [on a scale of -10 to 10] “in our indices last week,” he said and continued: “The movement in the last two days increased the positioning to slightly above four. “It’s still on the long side, but it’s a lot less crowded, which means a lot of the weaker hands are cleared.”
Despite the sharp declines in recent days, gold is still up nearly 65% compared to this time last year, while silver is up more than 120%.
