Precious metals extended their losses in Asian trading on Monday after a brutal sell-off late last week.
Spot gold was down 3.5% at around $4,724 per troy ounce at 9:04 p.m. ET on Sunday, after tumbling more than 10% on Friday. Despite the pullback, the yellow metal remains up about 10% year to date.
Spot silver fell 2% to around $83.40 an ounce after plunging as much as 36% on Friday. Prices are still up 19% so far this year.
The declines followed a sharp meltdown on Friday after Donald Trump tapped Kevin Warsh to run the Federal Reserve after Fed Chair Jerome Powell’s term ends in May.
Warsh is viewed as more hawkish and more likely to preserve the central bank’s independence than other candidates.
That outlook hit the debasement trade — pushing the US dollar higher, weighing on dollar-denominated commodities such as gold and silver.
Most importantly, Warsh supports shrinking the Fed’s balance sheet, which would ease fears of a weaker dollar and help explain recent declines in gold and silver prices, wrote Vishnu Varathan, Mizuho’s Asia head of research excluding Japan, on Monday in Asia.
Before the sell-off, gold and silver had been on a blistering yearlong rally, fueled by heavy central bank buying and geopolitical tensions.
Those forces remain in place and could continue to provide support, even as speculation — driven by Chinese demand — eases.
“I think the fundamentals remain pretty well in place despite those risks around Fed independence,” Daniel Hynes, a senior commodities analyst at ANZ , told Bloomberg TV, on Monday.
Hynes said broad geopolitical tensions continue to support the gold market, even as he expects price volatility to remain high.
“The general unbending of the world order that we hear about constantly, and the US’s role within that, has really been at the crux of this haven buying, and I don’t see that ending any time soon,” he said.
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