Gold and silver prices took a sharp dive on Monday, continuing a decline that started last week. In early London trading, gold fell 7% to $4,538 per troy ounce, while silver dropped 13% to $74.
This drop came after a record-breaking rally that had many investors flocking to precious metals due to rising geopolitical tensions and concerns about the direction of the U.S. Federal Reserve. Investors were initially encouraged by Donald Trump’s nomination of Kevin Warsh, a well-respected former Fed governor, which eased fears about aggressive interest-rate cuts.
As metal prices fell, Asian stock markets followed suit. South Korea’s Kospi dropped 5.3%, and Hong Kong’s Hang Seng index fell 3.1%. U.S. equity futures also saw declines, with the S&P 500 and Nasdaq 100 down 1.4% and 1.8%, respectively.
Analysts suggest that some investors who used borrowed money to buy gold and silver are now forced to sell other holdings to cover their losses. Hao Hong, chief investment officer at Lotus Asset Management, noted, “People are selling the high flyers to raise cash.” This selling frenzy is being exacerbated by increased margin requirements set by the CME Group, which recently raised the margin for gold and silver futures.
Prashant Bhayani, from BNP Paribas Wealth Management, emphasized that these margin changes would impact asset prices in the short term.
Interestingly, as the dollar rose 0.2% against a basket of currencies on Monday, bond yields for 10-year U.S. Treasuries dipped slightly to 4.21%.
While prices are tumbling now, demand for gold has been strong recently. Many investors see it as a safe haven amid fiscal concerns and geopolitical uncertainty. Raymond Cheng from Standard Chartered believes the current price for gold could be a buying opportunity, especially in light of ongoing concerns regarding U.S. government spending and potential policy changes.
In the broader context, gold mining stocks are also seeing losses. Companies like Newmont Corporation and Zijin Gold International lost 10% and 5.6%, respectively.
Overall, the current changes in the precious metals market reflect broader economic conditions and investor sentiment. It’s a reminder that markets can turn quickly, and staying informed is key for anyone involved.
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