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Precious Metals Take a Tumble: Gold and Silver Extend Losses After Weekend Selloff
Gold and silver continued their downward slide on Monday, extending significant losses from the end of last week. Gold futures plunged over 3% to approximately $4,707, having already dropped nearly 10% on Friday, pushing prices below the $5,000 per ounce threshold. Both metals experienced volatile trading throughout Monday, fluctuating between gains and losses.
In response to last week’s sharp selloff, the CME Group announced increased margin requirements for precious metals, effective after market close on Monday. Margins for COMEX gold futures have been raised from 6% to 8%, while those for COMEX 5,000-ounce silver futures jumped from 11% to 15%.
The dramatic reversal in metals on Friday was attributed to a confluence of factors. Optimism surrounding potential U.S. interest-rate cuts clashed with a sudden reevaluation of Federal Reserve leadership, following President Donald Trump’s nomination of former Fed Governor Kevin Warsh to succeed Chair Jerome Powell when his term concludes in May.
José Torres, senior economist at Interactive Brokers, noted the resurgence of the “Buy America” trade, stating, “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.”
Christopher Forbes, head of Asia and the Middle East at CMC Markets, characterized gold’s sharp retreat as a “classic air-pocket after an extraordinary run,” rather than a fundamental breakdown in the long-term bullish outlook. He cited profit-taking, a stronger dollar, and fresh geopolitical news from Washington as factors “knocking froth off a crowded trade.”
The dollar index, which measures the greenback’s strength against other major currencies, has strengthened by approximately 0.8% since Thursday. A stronger dollar typically makes dollar-priced gold less appealing to foreign buyers. Additionally, higher interest rates increase the opportunity cost of holding non-interest-paying gold, making Treasury bonds a more attractive safe haven.
Forbes anticipates that gold prices will remain elevated but volatile in the near term as markets await further clarity on Warsh’s policy direction. Despite the recent downturn, silver prices are still up around 16% year-to-date, with gold also showing an 8% increase. Both metals experienced record-breaking rallies last year, surging approximately 145% and 65% respectively.
Looking ahead, Forbes maintains a bullish long-term outlook for bullion, suggesting that “renewed dollar weakness or confirmation of a dovish Warsh would bring dip-buyers back.” He believes the metal could revisit recent highs if the Fed continues easing while growth and inflation remain uneven.