Wild fluctuations in financial markets overnight settled down as Wall Street began trading on Monday. U.S. stocks remained relatively stable after gains in Europe and significant declines in Asia, while gold and silver prices rebounded from earlier steep losses.
The focal point in financial markets once again centered on precious metals, where momentum abruptly paused following a surge in gold prices over the past year. Gold briefly slipped below $4,500 US per ounce during overnight trading, marking a drop of over $1,000 from its recent peak. However, it managed to recover most of the losses and settled at $4,725.00, down 0.5% from Friday’s closing.
Silver experienced even more volatility, swinging from a nine percent loss overnight to a three percent gain. The surge in gold and silver prices had been driven by investors seeking safe havens amidst various concerns, including potential changes in the Federal Reserve’s independence, inflated U.S. stock market valuations, tariff threats, and global government debt burdens.
The recent price declines on Friday, with silver plunging by 31.4%, were attributed in part to President Donald Trump’s nomination of Kevin Warsh as the next Federal Reserve chair. Some interpreted Warsh’s background as a former Fed governor to signal a potential policy stance favoring higher interest rates to combat inflation, which could reduce the appeal of gold and silver as protective assets.
However, conflicting views emerged on Wall Street regarding Warsh’s anticipated approach, with some speculating that Trump’s expectation might lean towards interest rate cuts, aligning with the president’s prior demands. The Fed chair’s decisions significantly impact global markets and the economy by influencing interest rates, in turn affecting various investment classes while aiming to balance job market growth and inflation control.
The recent downturns in gold and silver prices were likely driven by traders unwinding leveraged positions betting on further price surges, rather than a fundamental shift in demand outlook for these metals, as noted by Darrell Cronk, chief investment officer for Wealth & Investment Management at Wells Fargo.
As trading commenced, the S&P 500 marginally decreased by 0.1%, signaling a potential fourth consecutive loss. The Dow Jones Industrial Average rose by 111 points or 0.2% at 9:35 a.m. ET, while the Nasdaq composite declined by 0.3%. Notably, prominent technology stocks, including Nvidia, faced downward pressure, with Nvidia registering a 2.2% decline due to concerns impacting the AI technology sector.
In Asia, AI-related stocks experienced pronounced losses, with South Korea’s Kospi plunging by 5.3% from its peak, marking the index’s most significant daily drop in nearly ten months following a substantial decline in chip company SK Hynix shares.