Precious metals prices plunged on Friday after the nomination of Kevin Warsh as chairman of the Federal Reserve. Warsh is perceived as a more orthodox economist than other potential candidates for the head of the US central bank.
According to the Financial Times, the price of gold fell on Monday by as much as 7.8%, to $4,515. per troy ounce. Silver fell 14.4% to $73.
Speculation on gold prices
“We've seen quite a bit of speculative activity,” Raymond Cheng, chief investment officer for northern Asia at Standard Chartered, told the FT, commenting on gold prices. “This triggered a reversal of the trend after the announcement of Warsch's nomination,” he added.
Global stock markets fell, with South Korea's Kospi index leading declines in Asia, losing 4.6%. Futures contracts for the US S&P 500 and Nasdaq 100 indexes fell by 1%, respectively. and 1.4 percent Futures on the European Stoxx Europe 600 fell by 0.8%.
The dollar strengthened by 0.1% on Monday. against the basket of major currencies, while the yields on 10-year US treasury bonds fell by 0.01 percentage points. to 4.22 percent Bond yields move inversely to prices.
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Gold prices down. “Opportunity to buy”
The recent increases in bullion prices were initially fueled by increased central bank purchases following Russia's 2022 freeze of foreign exchange reserves following its full-scale invasion to Ukraine.
The newspaper emphasizes that the growing demand from private investors buying ETF funds and physical gold additionally strengthened the boom. Investors pointed to gold as a hedge against growing concerns about increased fiscal spending in developed countries and geopolitical uncertainty.
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Raymond Cheng suggests that gold at $4,650 per ounce is an “opportunity to buy” the metal amid uncertainty regarding government spending in the US. “We believe Trump's risk premium is still justified,” Cheng said. “He will remain president of the US regardless of who becomes the head of the Fed. His fiscal policy will continue to be expansionary.”
In parallel with the decline in gold prices, shares of mining companies also fell. The price of the Australian-listed Newmont Corporation lost 10 percent, and the shares of Zijin Gold International fell by 5.6 percent.
