Gold is on track to deliver its largest monthly gain since January 1980, with prices up approximately 20% over January trading and positioned for a sixth consecutive monthly increase. However, the precious metal experienced a dramatic 6.4% crash on Friday due to rumors that the next Federal Reserve chair might prefer higher interest rates. According to MarketPulse, this historic rise has been driven by investors rushing to buy the metal as a safe place to protect their money during uncertain economic and political times. Despite the recent volatility, gold remains supported by heavy buying from central banks, institutions, and individual investors seeking safe-haven assets amid intensifying global geopolitical and economic tensions.
Markets are awaiting President Trump's announcement of his choice for the next Federal Reserve chair, with Kevin Warsh seen as the favorite despite his generally preferring lower interest rates. As per MarketPulse, investors view Warsh as a "safe" choice who is unlikely to take extreme risks with the economy compared to other candidates. This speculation weighed heavily on gold during Asian trading, with the precious metal experiencing significant selloffs as markets priced in potential policy changes. The latest developments show Warsh was seen at the White House yesterday evening, with Trump announcing he'd announce Powell's successor Friday morning (US time). According to KBC Market Research, "A lot of people think this is somebody that could've been there a few years ago" - a reference to Warsh missing out on the chairmanship to Powell in 2017. Markets seem to give him the benefit of the doubt with the kneejerk reaction in gold and silver accompanied by a higher dollar and US yields, though any nomination also needs Senate confirmation.
The precious metals selloff extended beyond gold and silver, with spot platinum down more than 14% and palladium falling close to 12% during Friday's trading session. According to Baystreet.ca, by 5:04 a.m. ET, spot silver was down 15% to settle at around $98.66 U.S. per ounce - taking it back below the $100 milestone. Front-month gold contracts lost 5.5% in New York, while silver futures for February delivery were down by 11%. The selloff gripped the wider precious metals market, with mining stocks also suffering significant losses. In Europe, the regional Stoxx 600 Basic Resources index was 3.2% lower in morning deals, while London-listed Fresnillo, the world's biggest silver producer, was last seen 7% lower. On Wall Street, silver miner Endeavour Silver was down 14.7% and First Majestic Silver lost 14.4% in pre-market trade. Silver ETFs were particularly hard hit, with the ProShares Ultra Silver fund last seen 25% lower ahead of the opening bell and the iShares Silver Trust ETF losing 12.7%.
European economies showed surprising strength at the end of last year, with Germany and Italy both growing by 0.3%, beating predictions, while Spain performed the best with strong 0.8% growth. According to MarketPulse, this growth defied expectations that the region would suffer from trade wars, competition from China, and nearby military conflicts. France also expanded by 0.2%, which was exactly what experts had expected. The European Central Bank maintains its accommodative stance with ECB Executive Board member Isabel Schnabel stating that monetary policy is "in a good place" and interest rates are expected to remain at current levels for an extended period. However, as reported by investingLive, European markets are navigating through renewed trade and geopolitical uncertainties, with the STOXX Europe 600 Index ending lower and major indexes like France's CAC 40 and Germany's DAX also experiencing declines.
European stock markets rose slightly on Friday, putting them on track to finish January with a 2.6% gain - the seventh month in a row that stocks have gone up, the longest winning streak since 2021. However, silver and platinum also experienced massive selloffs with silver down around 10%. The US dollar strengthened on Friday, with the index tracking its performance against six major currencies rising 0.37% to 96.48. The Euro dropped 0.3% to $1.1932, while the British Pound fell 0.4% to $1.3765. Additionally, the dollar climbed 0.5% against the Japanese yen, reaching a level of 153.88 yen. The drop follows speculation that president Trump is expected to pick Kevin Warsh as the new Fed chair instead of Rick Rieder, with the eye-watering rally in gold and silver coming to a screeching halt after both hit new record highs before crashing 8-12% before paring losses back to opening levels. Precious metals have been on a stellar rally over the past 12 months, amid broader market volatility, the decline of the U.S. dollar, bubbling geopolitical tensions and concerns about the independence of the Federal Reserve.