Gold Plunges, the Dollar Strengthens, and Oil Slides After the Fed Pivots
The decline in gold spread across the broader precious metals complex, which also posted steep losses amid heavy profit-taking.
Quick overview
- The U.S. dollar strengthened sharply following Kevin Warsh's appointment as chair of the Federal Reserve, leading to a significant drop in gold prices.
- Gold prices fell over 7%, breaking below $5,000 per ounce, despite being on track for a 15% gain in January.
- The rise of the dollar negatively impacted other precious metals, with silver, platinum, and palladium also experiencing steep losses.
- Oil prices retreated nearly 1% amid easing tensions with Iran, following President Trump's indication of a willingness to engage in dialogue.
The strengthening of the U.S. dollar following the appointment of Kevin Warsh as chair of the Federal Reserve triggered a sharp correction in gold and put downward pressure on oil prices and other key assets.
Gold prices plunged more than 7%, breaking below the $5,000-per-ounce threshold, in a session dominated by dollar strength after U.S. President Donald Trump confirmed the appointment of Kevin Warsh as the new head of the Federal Reserve, replacing Jerome Powell.
Spot gold fell 7.5% to $4,992.05 per ounce, while U.S. gold futures for February delivery dropped 6.4% to $4,985. The selloff came just one day after the precious metal hit a record high of $5,594.82 per ounce.
Despite the sharp daily pullback, gold remains on track to close January with gains of more than 15%, which would mark its best monthly performance since 1999 and its sixth consecutive monthly advance.
Stronger dollar after Warsh confirmation
Warsh’s appointment at the helm of the Fed sparked a rapid appreciation of the U.S. dollar, which recovered part of its weekly losses and moved away from four-year lows.
The U.S. Dollar Index (DXY), which tracks the greenback against a basket of six major currencies, rose 0.37% to 96.48 points. At the same time, the euro fell 0.3%, sterling slipped 0.4%, and the dollar gained 0.5% against the Japanese yen.
A stronger dollar makes gold and other dollar-denominated assets more expensive for international buyers, contributing to the deeper correction in precious metals.
Precious metals: broad-based profit taking
The decline in gold spread across the broader precious metals complex, which also posted steep losses amid heavy profit-taking after weeks of record-breaking gains.
Spot silver plunged 14.1% to $99.77 per ounce after reaching an all-time high of $121.64 on Thursday. Even so, silver is up nearly 42% for the month, on track for its strongest monthly performance on record.
Platinum slid 15.7% to $2,216.55 per ounce after touching a record $2,918.80 earlier in the week, while palladium dropped 13.4% to $1,737.50.
Oil retreats amid signs of easing tensions with Iran
Oil prices also moved lower, falling close to 1%, after Trump signaled openness to renewed dialogue with Iran over its nuclear program, easing concerns about potential supply disruptions.
Brent crude slipped to $70.03 per barrel, while the most active contract fell to $68.79. U.S. West Texas Intermediate (WTI) declined to $64.70 per barrel.
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