Gold and silver prices plunge as rally goes into reverse

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Gold and other metals prices plunged on Friday, as the nomination of Kevin Warsh as Federal Reserve chair punctured a blistering rally that has also sent silver, copper and platinum to record highs this week.

The yellow metal, which had soared to nearly $5,600 on Thursday, plummeted as much as 11 per cent on Friday to around $4,800 per troy ounce, continuing a rollercoaster ride that has propelled gold to fresh records as investors seek haven assets amid global turmoil and inflation fears.

The sharp pullback rippled across precious metals on Friday, with silver — which has risen even more sharply than gold this year — suffering a record one-day fall of 26 per cent and platinum falling 18 per cent.

“It is classic ‘top of the market’ behaviour,” said Tom Price, commodities analyst at Panmure Liberum. “There is confusion and uncertainty. Everyone is looking for clarity.”

The sharp moves on Thursday and Friday capped a month that has been “the most volatile month in precious metals history,” said Nicky Shiels, analyst at MKS Pamp.

Global turmoil — from Venezuela to Greenland to Iran — and a mounting sense of concern over US President Trump’s unpredictability sent investors scrambling into precious metals.

“The unthinkable has been happening daily,” said Shiels. “The rally was obviously too much too fast,” she added.

The news overnight that US President Donald Trump was likely to nominate Warsh as the next Fed chair also boosted the dollar. The appointment was confirmed by Trump on Friday morning.

Some investors argue a Fed led by Warsh, seen as a more orthodox economist than some of the other potential candidates, is likely to keep a firmer hand on inflation. Worries over dollar debasement have been a key argument of gold bulls over the past year.

Shares in precious metal miners also slumped after a months-long surge, with New York-listed Newmont and Barrick Mining both down 10 per cent. London-listed Fresnillo fell 5 per cent.

In Asia, moves by the Shanghai Futures Exchange to tamp down the metals rally are also starting to have an effect. The SHFE said it had suspended 10 groups of trading accounts on Friday, following an announcement on Thursday that warned market participants to take measures to “invest rationally” to maintain market stability.

“Elevated volatility should be expected given the extreme price action leading into it,” said Arun Sai, senior multi-asset strategist at Pictet Asset Management. The firm is sticking to its thesis that gold will benefit from diversification among central bank reserve managers and other investors.

Charles-Henry Monchau, chief investment officer at Swiss bank Syz, said the falls seemed to reflect “capitulation on the buy side” after the most extreme moves in gold, relative to its long-term average, in decades.

This and a surge in implied volatility suggest “that the market is excessively overbought in the short term, calling for a more cautious stance”, he added.