Gold and silver prices seesawed on Monday, after a “meltdown” in the metals market deepened and rattled investors around the world.
Gold prices tumbled by as much as 8% to $4,465 an ounce on Monday, ending a run of record highs that took it to nearly $5,600 just last week. It later recovered some ground, but was still down by 3% at $4,718.35.
Silver fell by as much as 7%, after a 30% slump on Friday, but steadied at around a 3.3% drop to $81.75 an ounce.
The partial recovery in the metals market helped support the UK’s blue chip FTSE 100 stock index, which breached the 10,300 mark for the first time.
Gold and silver 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, a senior research strategist at Pepperstone, described Friday’s sell-off as a “meltdown in the metals space”.
Kevin Warsh. Photograph: Brendan McDermid/Reuters
The price of industrial metals, which had swept up in the metals rally, also dropped on Monday, with platinum and copper both falling.
Meanwhile, bitcoin also recovered some of its losses over the weekend, rising by 1.8% against the US dollar, although the cryptocurrency still traded below $80,000 and is far off its peak of $125,000 last year.
Oil prices fell by 4%, as investors watched signs of geopolitical tensions easing between the US and Iran. Brent crude traded at about $65.24 a barrel, down from highs of about $71 last week.
But the US stock market opened higher on Monday, with the S&P 500 share index ticking up 0.4%. The dollar, which slumped in the second half of January, rose by 0.43% against a basket of rival currencies.
While gold and silver prices are falling , 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%.
