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Gold and silver prices have tumbled as a record-breaking rally in precious metals cooled while global stock markets were set to open lower.
The price of gold fell 7.8 per cent on Monday to $4,515 a troy ounce, while silver slid 14.4 per cent to $73.
Precious metals prices plunged on Friday after the nomination of Kevin Warsh as Federal Reserve chair. Warsh is viewed as a more orthodox economist than some other potential candidates to lead the US central bank.
“We were seeing quite a bit of speculative activity,” said Raymond Cheng, chief investment officer for north Asia at Standard Chartered, about gold prices. “That spurred the reversal after the announcement for Warsh.”
Global stock markets declined, with South Korea’s Kospi leading losses in Asia with a fall of 4.6 per cent. US equity futures tracking the S&P 500 and Nasdaq 100 declined 1 per cent and 1.4 per cent, respectively. Futures tracking the Stoxx Europe 600 dropped 0.8 per cent.
The dollar edged up 0.1 per cent against a basket of its key trading partners on Monday while yields on 10-year US Treasuries fell 0.01 percentage points to 4.22 per cent. Bond yields move inversely to prices.
The recent gains in bullion were initially driven by increased central bank buying after Russia’s foreign exchange reserves were frozen in 2022 following its full-scale invasion of Ukraine.
Rising demand from private investors buying exchange traded funds and physical bullion added to the rally. Investors have cited gold as a hedge against mounting concerns over increased fiscal spending in developed economies around the world as well as geopolitical uncertainty.
Cheng said gold trading at $4,650 was “an opportunity to add” the metal amid uncertainty about government spending in the US.
“We think the Trump risk premium is still warranted,” said Cheng. “He will stay as the US president no matter who the Fed chair [is]. His fiscal policy will remain expansionary.”
Gold mining stocks also slid, with the Australian-listed shares of Newmont Corporation falling 10 per cent and those of Zijin Gold International slipping 5.6 per cent.