Gold, silver and copper prices fell on Friday after hitting record highs this week as nervous investors looked to lock in profits as hopes for aggressive U.S. interest rate cuts began to fade and the dollar began to stabilize.
President Donald Trump announced Friday that he has selected former Federal Reserve Board member Kevin Warsh to head the U.S. Federal Reserve. The dollar index, which measures the U.S. currency against its peer, was steady on expectations for Warsh’s appointment.
“The market believes Kevin Warsh is reasonable and won’t aggressively push for rate cuts,” said Tom Price, an analyst at Panmure Liberum. “Generalist investors with a variety of objectives, including capital preservation, are looking to make a profit.”
A strengthening U.S. currency could make dollar-priced metals more expensive for holders of other currencies, hurting demand. This relationship is used by funds that trade using buy and sell signals from numerical models.
Investors outflow money after gold, silver rally
Gold and silver prices have risen 17% and 39%, respectively, in January so far, and after several days of thin liquidity, the last trades of the month saw some profit-taking, but small flows driven by fear of missing out drove the big moves.
“Given the highly speculative and open-ended nature of the recent rally, both gold and silver are ripe for a correction,” said Ole Hansen, head of commodities strategy at Saxo Bank.
Gold was down 4.7% at $5,143.40 an ounce at 1201 GMT, and silver was down 11% at $103.40 an ounce, after hitting record highs of $5,594.80 and $121.60 an ounce respectively on Thursday.
“Precious metals have discovered gravity,” said independent analyst Ross Norman. “Although it is cruel, speculators have been reminded that this is a two-way market.”
Copper hit a record high of $14,527.50 a tonne on Thursday, but fell 1.1% to $13,465 a tonne. It’s up about 6% so far this month after rising 11% in December.
“Prices are likely to remain high and volatile as capital continues to flow into this relatively small and currently very crowded market,” Macquarie analyst Alice Fox said.
Traders expected further losses in copper, aluminum and other industrial metals listed on exchanges ahead of the Lunar New Year holiday on February 16, when China, the metal’s biggest consumer, will be shut down for a week.
“Chinese investors will not want to take a position in such a volatile market,” Panmure’s Price said. “Look what happened in just 12 hours.”
(Reporting by Pratima Desai; Editing by Louise Heavens)
