Silver and gold fell on Monday, extending losses after a major selloff at the end of last week.
Silver futures
ticked down 0.3% to $78.70. Silver, which had surged alongside gold on safe haven demand and speculative inflows, dove 28% on Friday for its worst day since March 1980.
Gold futures slid more than 3% to around $4,707. The yellow metal dropped nearly 10% on Friday, sending prices below the $5,000 an ounce mark.
The metals swung between gains and losses in Monday's choppy trading day.
The CME Group increased margin requirements following the steep sell-off last week, effective Monday after market close. Margins on COMEX gold futures have been raised to 8% from 6%, while those on the COMEX 5,000-ounce silver futures were lifted to 15% from 11%.
Metals saw a violent reversal on Friday as optimism around U.S. interest-rate cuts collided with a sudden reassessment of Federal Reserve leadership after President Donald Trump nominated former Fed Governor Kevin Warsh to succeed Chair Jerome Powell after his term ends in May.
"The 'Buy America' trade is back as a result, and the independence bid that drove gold and silver to nosebleed record heights right below $5,600 and $122 per ounce early Thursday morning is unraveling," José Torres, senior economist at Interactive Brokers, said in a note on Monday.
Christopher Forbes, head of Asia and the Middle East at CMC Markets, said gold's sharp retreat reflects a classic correction after an extraordinary rally rather than a breakdown in the longer-term bullish thesis.
Gold's retreat is a "classic air-pocket after an extraordinary run," Forbes said. "Profit-taking, a firmer dollar, and fresh geopolitical headlines from Washington have knocked froth off a crowded trade."
The dollar index, which measures the strength of the greenback against a basket of currencies, has strengthened about 0.8% since Thursday.
A stronger dollar makes greenback-priced gold less attractive for foreign buyers, while higher rates raise the opportunity cost of holding the non-interest-paying yellow metal by making Treasurys more attractive as a safe haven.
Warsh has been an advocate of a tighter monetary policy, and his announcement as Fed chair has strengthened the dollar. At the same time, Trump's statements indicating a possible deal with Iran appear to have eased geopolitical concerns — WTI crude
futures were down about 4% on Monday.
In the near term, gold prices will remain elevated but volatile as markets await further clarity on Warsh's policy direction, Forbes said.
Silver prices are still up around 16% since the start of the year, while gold prices are also about 8% higher year to date. Gold and silver both saw record-smashing rallies last year, surging about 65% and 145%, respectively.
"Renewed dollar weakness or confirmation of a dovish Warsh would bring dip-buyers back," said Forbes, who still maintains a bullish case for bullion in the longer 12 month horizon, adding that the metal can revisit recent highs, if the Fed continues easing while growth and inflation stay uneven.
