Gold and silver continued their decline on Monday, worsening losses from last Friday’s crash as a stronger dollar and profit-taking diminish the momentum from a rally that had driven the precious metals to unprecedented highs just days before.
Spot gold fell roughly 5% to $4,616.79 per ounce, having dropped nearly 10% on Friday, when prices tumbled below $5,000 an ounce.
Silver, which had risen alongside gold due to safe haven demand and speculative inflows, also faced pressure after last Friday’s 30% decline that marked its worst day since March 1980.
Spot prices of silver were down over 12%, before slightly recovering to $78.30 per ounce as of 3.19 a.m. ET.
The CME Group raised margin requirements in response to the significant sell-off last week, effective Monday after market close. Margins on COMEX gold futures increased to 8% from 6%, while those on the COMEX 5,000-ounce silver futures were raised to 15% from 11%.
Analysts indicate that the retreat follows the drastic reversal on Friday, when optimism regarding U.S. interest-rate reductions met a sudden reassessment of Federal Reserve leadership after President Donald Trump nominated former Fed Governor Kevin Warsh to take over from Chair Jerome Powell once his term ends in May.
“The ‘Buy America’ trade has returned as a result, and the independence narrative that pushed gold and silver to stratospheric record levels just below $5,600 and $122 per ounce early Thursday is unraveling,” stated José Torres, senior economist at Interactive Brokers, in a note on Monday.
Christopher Forbes, head of Asia and the Middle East at CMC Markets, mentioned that gold’s drastic pullback represents a typical correction following an extraordinary rally rather than a failure of the longer-term bullish sentiment.
Forbes noted that gold’s decline is a “classic air-pocket after an amazing surge.” “Profit-taking, a stronger dollar, and new geopolitical news from Washington have deflated a crowded trade.”
The dollar index, which assesses the greenback’s strength against a range of currencies, has risen roughly 0.8% since Thursday.
A firmer dollar renders U.S.-priced gold less appealing for overseas buyers, while increased rates heighten the opportunity cost of holding the non-interest-bearing yellow metal by making Treasurys more attractive as a safe investment.
Warsh has supported a stricter monetary policy, and his appointment as Fed chair has bolstered the dollar. Additionally, Trump’s comments hinting at a potential agreement with Iran seem to have lessened geopolitical tensions — WTI crude futures experienced a decline of about 4% on Monday.
In the short term, gold prices are expected to remain high but volatile as markets await more clarity on Warsh’s policy stance, according to Forbes.
Silver prices are still up about 16% since the year’s beginning, while gold prices are approximately 8% higher year to date. Both gold and silver saw record-breaking rallies last year, surging about 65% and 145%, respectively.
“Renewed dollar weakness or confirmation of a dovish Warsh would attract dip-buyers again,” Forbes predicted, maintaining a favorable outlook for bullion over the following 12 months, suggesting that the metal could reach previous highs should the Fed continue to ease while growth and inflation remain uneven.
