Gold and silver prices seesawed on Monday after a deepening sell-off in the metals market rattled investors worldwide. Gold tumbled by as much as 8% to $4,465 an ounce, ending a run of record highs that took it to nearly $5,600 last week. It later recovered some ground but remained 3.5% lower at $4,700 in afternoon trading, while silver fell by up to 7% after Friday's 30% slump before recovering slightly to $79.60 an ounce.
The partial recovery helped support the UK's FTSE 100 index, which breached the 10,300 mark for the first time, closing at 10,341 after hitting an intraday high of 10,345. Donald Trump triggered the sell-off on Friday when he said he would nominate Kevin Warsh, a former Fed governor, 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.
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”.
Industrial metals, which had been swept up in the rally, also dropped on Monday, with platinum and copper both falling. Bitcoin recovered some of its weekend losses, rising 1.8% against the dollar, though it still traded below $80,000, far off its peak of $125,000 last year. Oil prices fell 4% to about $65.24 a barrel as investors watched signs of easing geopolitical tensions between the US and Iran.
US stock markets opened higher, with the S&P 500 ticking up 0.4%, while the dollar rose 0.43% against a basket of currencies. Despite the sharp falls, analysts at Deutsche Bank said they still expect gold to hit $6,000 this year.
Mohit Kumar, of the broker Jefferies, characterised the sell-off as an unwind of a “crowded” trade. “Gold was one of the most crowded positions with positioning reaching close to 8 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.” Even with recent declines, gold remains up about 65% year-on-year, while silver has gained more than 120%.
