Gold and Silver Prices Plunge as Dollar Strengthens Amid Market Uncertainty

Gold and silver prices experienced a notable decline on Monday as the U.S. dollar strengthened, prompting investor concerns regarding Kevin Warsh, President Donald Trump’s nominee for the Federal Reserve chair, and his potential approach to interest rates.

Spot gold fell 5.01% to $4,649.18 per ounce by 03:11 GMT, while U.S. gold futures for February delivery decreased by 2.31% to $4,635.30 per ounce.

Gold had reached a record high of $5,594.82 per ounce last Thursday before the recent declines began.

Silver saw an even steeper drop, falling over 10% to $76.04 per ounce after hitting a historic peak of $121.64 last Thursday.

Platinum also declined, dropping 6.07% to $2,065.79 per ounce after reaching its highest level of $2,918.80 on January 26.

Daniel Albana, a financial market analyst at First Financial Markets, provided insights into the sharp decline, stating:

"The situation we observed was more than just profit-taking; it followed an unsustainable vertical rise in gold that exceeded $400 in a single day, leaving banks and investors ill-prepared to manage the associated risks."

He added that the market faced "forced liquidations and market washing" due to margin increases implemented by brokers, which compelled those unable to provide additional liquidity to sell quickly, further intensifying the downward trend amid panic.

Albana noted that the swift drop from levels of $5,400-$5,500 to around $4,700 per ounce resulted in considerable losses for investors who bought at the peak and utilized high leverage. He mentioned that the market's pricing of Warsh's anticipated tightening monetary policy added psychological pressure on the precious metals.

These developments occur as investors await clarity on the direction of U.S. monetary policy, with mixed expectations surrounding the future of the dollar and gold following an unprecedented rise in gold prices not seen in decades.