Gold, silver plunge as wild swings, record losses rattle metals markets

Gold suffered its biggest slide in four decades and silver posted a record intraday decline in a stark reversal of the rally that lifted prices to all-time highs.
Gold fell more than 12 percent to slump below $5,000 an ounce in its biggest intraday decline since the early 1980s. Silver plunged as much as 36 per cent, a record intraday decline, as the selloff swept through the broader metals markets. Copper fell 3.4 per cent in London, retreating from Thursday’s record high. The dollar jumped, boosted by a selloff commodity currencies including Australian dollar and Swedish krona.
A wave of investor demand for precious metals over the past year has clocked record after record, shocking seasoned traders and driving exceptional price volatility. That accelerated in January, as investors piled into the time-honored havens amid concerns about currency debasement and the Federal Reserve’s independence, trade wars and geopolitical tensions.
Friday’s selloff is the biggest shock to the rally, outdoing the slump in October. It was triggered by the dollar rebounding after a report the Trump administration was preparing to nominate Kevin Warsh for Fed chair, a move later confirmed. The greenback’s rally undercut sentiment among investors who had been piling into metals after the US president signaled a willingness to let the currency weaken.
Traders regard Warsh as the toughest inflation fighter among the finalists, raising expectations of monetary policy that would underpin the dollar and weaken greenback-priced bullion.
“Trump announcing Warsh as his pick for next Fed Chair has been a US dollar positive and precious metals negative,” said Aakash Doshi, global head of gold and metals strategy at State Street Investment Management. “This has probably been exacerbated by month-end rebalancing as both short dollar and long precious metals has been the consensus macro trade over the past two to three weeks.”
Gold’s move “validates the cautionary tale of fast-up, fast-down,” said Christopher Wong, a strategist at Oversea-Chinese Banking Corp. While reports of Warsh’s nomination were a trigger, a correction was overdue, he said.