Silver fell sharply, wiping out a two-day recovery, as the white metal struggled to find a floor following a historic market rout. Gold also declined.
Spot silver plunged as much as 17% on Thursday, having flickered briefly above $90 an ounce in early Asian trading. After a record-breaking rally that appeared to run too far, too fast, the metal has retreated by more than a third from an all-time high hit on Jan. 29.
“Sentiment seems to have turned soggy across most asset classes, including regional equities and metals,” said Christopher Wong, a strategist at Oversea-Chinese Banking Corp. This has created “a feedback loop amid thin market liquidity,” he said.
The sudden and sharp decline in precious metals also weighed on sentiment in base metals markets, with copper falling more than 1% to slip below $13,000 a ton. Meanwhile, spot gold dropped as much as 3.5% in choppy trading.
Precious metals soared last month in a rally underpinned by speculative momentum, geopolitical upheaval and concerns about the US central bank’s independence. That surge came to an abrupt halt at the end of last week, with silver seeing its biggest ever daily drop on Friday and gold plunging the most since 2013.
Investors had built up large positions in precious metals, and further fuel was added by heavy inflows into leveraged exchange-traded products and a wave of call-options buying. A sudden collapse during Asian trading hours on Friday continued into the early part of this week, before dip-buying supported prices in the last couple of sessions.
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Markets are now weighing the policy implications of Kevin Warsh’s nomination as Federal Reserve chair, with President Donald Trump saying Wednesday he would not have nominated him for the role had he expressed a desire to hike interest rates. Trump said in an NBC News interview there was “not much” doubt the Fed would lower rates again — a tailwind for precious metals, which don’t pay interest.
Gold prices are “likely to remain volatile until there is greater certainty on the monetary policy outlook,” Standard Chartered Plc analysts including Sudakshina Unnikrishnan said in a note. Some of this near-term volatility may result from investors redeeming their holdings in exchange-traded products, they said, but “structural drivers remain intact and we continue to expect a rebuild to the upside.”
Silver has traditionally been more volatile than its more expensive cousin, owing to its smaller market size and lower liquidity. Even then, recent swings stand out for their scale and speed, with price moves magnified by heavy speculative inflows and thinner trading in the over-the-counter market.
Silver plunged 12.7% to $76.99 an ounce as of 12:19 p.m. in Singapore. Spot gold was 1.7% lower at $4,881.35. Platinum and palladium fell. The Bloomberg Dollar Spot Index, a gauge of the US currency, rose 0.1%.