Gold and silver experienced a significant slump on Monday, triggered by market reactions to US President Donald Trump’s nomination of Kevin Warsh as the potential successor to Jerome Powell as Federal Reserve chair. Gold prices plummeted as much as 6.3 per cent, briefly dipping below $US4600 an ounce, following a rally that had pushed it to nearly $US5600 the previous week. Silver also took a hit, plunging as much as 12 per cent after a record 26 per cent dive on Friday.
Commonwealth Bank commodity strategist Vivek Dhar noted that the precious metals’ decline has prompted market speculation about whether the sell-off represents a buying opportunity or signals the beginning of a price correction. According to Dhar, the market’s reaction suggests a perception that Warsh is more hawkish compared to other candidates, Rick Rieder and Kevin Hassett.
Justin Lin, investment strategist at Global X ETFs, described the sell-off as a “healthy and much-needed reset,” particularly for gold. Lin stated that the market’s reaction to Warsh may have been excessive, and that appointing someone like Warsh helps preserve Fed legitimacy without abandoning the objective of lower rates.
The drops significantly impacted miners on the ASX, with Newmont falling 10.1 per cent to $155.96 and Emerald Resources declining 9.3 per cent to $6.76. Despite these movements, Lin maintains that the core investment case for precious metals remains intact, saying that if gold made sense to you a week ago, then these post-weekend prices should be viewed as a much more attractive entry point.
