Gold and silver prices fell on Friday as President Donald Trump’s nomination of the next Federal Reserve chairman, Kevin Warsh, appeared to ease concerns about central bank independence and boost the greenback.
Spot silver fell 28 percent to $83.45 an ounce, trading near its daily lows. Silver futures fell 31.4 percent to settle at $78.53, their worst day since March 1980.
Meanwhile, spot gold fell about 9 percent to trade at $4,895.22 an ounce. Gold futures fell 11.4 percent to close at $4,745.10.
The sharp decline was initially prompted by reports of Warsh’s nomination. However, they gained momentum in afternoon US trading as metals investors raced to take profits. Metals were also under pressure as the dollar strengthened sharply, making it more expensive for foreign investors to buy gold and silver and undermining the theory that metals will replace the dollar as the world’s reserve currency, SEEbiz reports.
The dollar index last traded up around 0.8 percent.
“This is getting crazy,” said Matt Maley, an equity strategist at Miller Tabak. “Most of this is probably ‘forced selling’. This has been the most popular asset for day traders and other short-term traders of late. So there has been some spillover into silver. With today’s huge decline, margin calls are closed.”
National Economic Council Director Kevin Hassett has been the front-runner to replace Powell for a while, but Warsh has emerged as the front-runner in prediction markets in recent days.
In a note on Friday morning, Evercore ISI’s Krishna Guha said the market was “trading Warsh hawkish.”
“Warsh’s selection should help stabilize the dollar somewhat and reduce (though not eliminate) the asymmetric risk of deep, prolonged dollar weakness caused by devaluation trades — which is also why gold and silver are sharply lower,” the company’s vice president said.
“However, we advise against overdoing Warsh’s ‘hawkish’ trading in asset markets – and even see some risk of a sharp reversal. We see Warsh as a pragmatist, not an ideological hawk in the tradition of an independent conservative central banker.”
Claudio Wewel, FX strategist at J. Safra Sarasin Sustainable Asset Management, told CNBC’s “Squawk Box Europe” on Friday that a “perfect storm” of geopolitical tensions has helped precious metals rally strongly this year, pointing to the U.S. capture of Venezuelan President Nicolás Maduro and Washington’s threats to use military force in Greenland and Iran.
