- Gold and silver continued to sell off on Monday, deepening losses from last Friday’s rout.
- Spot gold crashed nearly 10% on Friday, while silver nosedived 30%.
Gold and silver extended their sell-off on Monday, deepening losses from last Friday’s rout as a firmer dollar and profit-taking drained momentum from a rally that had propelled the metals to record highs just days earlier.
Spot gold lost around 5% to $4,617.07 per ounce, having crashed nearly 10% on Friday, when prices plunged below $5,000 an ounce.
Silver, which had surged alongside gold on safe haven demand and speculative inflows, also remained under pressure after last Friday’s 30% nosedive. Spot prices of the white metal were down more than 4% at $80.63 per ounce.
According to analysts, the pullback followed a violent reversal on Friday, when optimism around U.S. interest-rate cuts collided with a sudden reassessment of Federal Reserve leadership after President Donald Trump nominated former Fed Governor Kevin Warsh to succeed Chair Jerome Powell after his term ends in May.
“The ‘Buy America’ trade is back as a result, and the independence bid that drove gold and silver to nosebleed record heights right below $5,600 and $122 per ounce early Thursday morning is unraveling,” José Torres, senior economist at Interactive Brokers, said in a note on Monday.
Christopher Forbes, head of Asia and the Middle East at CMC Markets, said gold’s sharp retreat reflects a classic correction after an extraordinary rally rather than a breakdown in the longer-term bullish thesis.
Gold’s retreat is a “classic air-pocket after an extraordinary run,” Forbes said. “Profit-taking, a firmer dollar, and fresh geopolitical headlines from Washington have knocked froth off a crowded trade.”
The dollar index, which measures the strength of the greenback against a basket of currencies, has strengthened about 0.8% since Thursday.
A stronger dollar makes greenback-priced gold less attractive for foreign buyers, while higher rates raise the opportunity cost of holding the non-interest-paying yellow metal by making Treasurys more attractive as a safe haven.
Warsh has been an advocate of a tighter monetary policy, and his announcement as Fed chair has strengthened the dollar. At the same time, Trump’s statements indicating a possible deal with Iran appear to have eased geopolitical concerns — WTI crude futures were down about 4% on Monday.
In the near term, gold prices will remain elevated but volatile as markets await further clarity on Warsh’s policy direction, Forbes said.
Silver prices are still up around 15% since the start of the year, while gold prices are also about 8% higher year to date.
“Renewed dollar weakness or confirmation of a dovish Warsh would bring dip-buyers back,” said Forbes, who still maintains a bullish case for bullion in the longer 12 month horizon, adding that the metal can revisit recent highs, if the Fed continues easing while growth and inflation stay uneven.
CNBC
