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Gold prices tumbled on Monday in Asia as a record-breaking rally in precious metals cooled.
The price of gold fell as much as 6.3 per cent to below $4,600 a troy ounce for the first time since January 16, before rebounding to trade at $4,669. Silver prices fell as much as 11.9 per cent to $75 a troy ounce before paring losses to trade at $78.
The correction in precious metals prices began on Friday after the nomination of Kevin Warsh, seen as a more orthodox economist than some other potential candidates, as Federal Reserve chair.
“We were seeing quite a bit of speculative activity,” said Raymond Cheng, chief investment officer for north Asia at Standard Chartered. “That spurred the reversal after the announcement for Warsh.”
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.
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 is the Fed chair. His fiscal policy will remain expansionary.”
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