GOLD and silver suffered sharp declines on Monday as a record-breaking rally in precious metals reversed, sending ripples through global equity markets, said the Financial Times.
Gold dropped as much as 9% in early trading to $4,403 a ounce before recovering to $4,647, whilst silver tumbled as much as 15% to $71.33 before edging back to $78. The declines, which began last Thursday, extended into a second week.
Global equities fell, with futures tracking the S&P 500 and Nasdaq 100 down 0.7% and 1.1% respectively. Europe’s benchmark Stoxx Europe 600 declined 0.3% whilst South Korea’s Kospi closed 5.3% lower.
Donald Trump’s nomination on Friday of Kevin Warsh as the next Federal Reserve chair helped trigger the reversal. Warsh, a former Fed governor viewed as an orthodox choice, allayed concerns that Jay Powell’s successor would adopt a softer stance on inflation.
“As liquidity and volatility worsen, investors are selling what has done well so far this year,” said Matthias Scheiber, head of multi-asset investment at Allspring.
CME Group raised margin requirements on gold and silver futures following Friday’s steep price falls, intensifying the sell-off as investors unwound leveraged positions.
“The surge has been remarkable and leverage has played a key part in both the rally and now the decline,” said Guy Miller, chief market strategist at Zurich.
Oil also declined sharply, with Brent crude down nearly 5% at $66.07 a barrel, whilst copper and aluminium fell 2% and 3% respectively.
South Africa’s mining-heavy benchmark index tumbled as much as 6.8%, whilst Australian-listed shares of Newmont Corporation dropped 10%.