Gold Continues Decline After Major Rally, Silver Slips Again
Spot gold prices weakened on Monday (February 2), although they pared some of their sharp decline. Selling pressure emerged after US President Donald Trump nominated Kevin Warsh as the next Federal Reserve chairman—a trigger that also dragged down risk assets and pressured the precious metal.
At 1:50 p.m. Eastern Time (18:50 GMT), spot gold fell 4.2% to $4,660.22 per ounce, after earlier falling as low as $4,402.38. Meanwhile, April gold futures fell 1.3% to $4,682.86 per ounce.
By Friday, spot gold had already erased nearly 10% of its value after plummeting from a record high of nearly $5,600 per ounce set last week.
Gold Selling Pressure Increases Following Warsh's Nomination
The sharp selloff in gold was primarily triggered by Trump's nomination of Warsh as the next Federal Reserve Chair, following Jerome Powell's term ending in May. This nomination removed one source of market uncertainty, fading some of the safe-haven demand for gold and triggering profit-taking near record prices.
However, the market is also weighing the potential for Warsh to become more hawkish in the long term. The former Fed chairman, who aligns with Trump's push for lower interest rates, has also criticized the Fed's asset purchase program.
The US dollar rebounded from a four-year low following the news of the nomination, adding pressure on the metals market. Despite this, gold still closed January up nearly 15%.
Geopolitical Factors Contribute to Reduced Safe-Haven Demand
The safe-haven demand for gold also weakened after reports emerged that the US and Iran were open to a new round of negotiations, amid previously heightened Middle East geopolitical tensions.
Axios reported that mediators were working to arrange a meeting between US and Iranian officials in Turkey this week. This follows Trump's statement over the weekend that the US and Iran were in "serious" negotiations regarding Iran's nuclear ambitions.
Global geopolitical tensions—especially after Trump deployed a naval fleet to the Middle East—had previously boosted gold prices throughout January.
Thierry Wizman of Macquarie believes that gold's decline had already begun after reaching extreme speculative levels, even before rumors of Warsh's nomination broke. He also added that the prospect of a US-Iran "deal" could exacerbate gold's weakness today, while market participants are still uncertain whether Warsh will be hawkish or dovish.
$6,000 Target Retained
Amid the sharp correction, Deutsche Bank on Monday reaffirmed its gold price target of $6,000 per ounce, citing evidence of speculative activity and the belief that the underlying trend drivers remain positive.
JPMorgan also raised its gold price projection for end-2026 to $6,300 per ounce, citing continued strong demand from central banks and investors, despite increased price volatility.
Silver Further Down
Meanwhile, spot silver fell 6.7% to $78.96 per ounce. Earlier in the session, silver had fallen about 12%, adding to Friday's 27% decline—the largest daily drop on record.
Spot platinum traded slightly higher at $2,124.40 per ounce, after earlier dropping as low as $1,882.00.
Source: Newsmaker.id
