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The appointment of Kevin Warsh as Federal Reserve chair triggered selling across risk assets with gold falling to its lowest level in more than two weeks as investors anticipated tighter monetary policy ahead.[[1]](https://m.economictimes.com/markets/commodities/news/gold-drops-over-3-nears-2-week-low-ahead-of-increases-in-cme-precious-metals-margins/articleshow/127851734.cms) Gold slid 9 percent while silver plunged more than 13 percent after both metals recorded highs the previous week according to market reports. A stronger U.S. dollar added further pressure on commodities including oil and base metals as the greenback gained on the news.
The CME Group’s decision to raise margin requirements for precious metals contracts contributed to the decline by requiring higher capital from traders and prompting position unwinds. This adjustment generally reduces speculative participation and liquidity in the affected markets. Commonwealth Bank of Australia commodities strategist Vivek Dhar said the synchronized sell-off in metals and equities indicated that investors see Warsh as more hawkish than his predecessor.
Gold had climbed to successive records in recent sessions before the reversal erased some of those gains in the sharpest drops since major events in 1983. Market data compiled by Kitco placed spot gold below $4,550 an ounce following the release of weaker consumer sentiment figures and easing one-year inflation expectations from the University of Michigan. The metal remains well above levels from earlier in the decade despite the recent volatility.
Oil prices eased nearly 5.5 percent from multi-month highs while copper on the London Metal Exchange gave up almost 5 percent in the same session. These moves across commodities reflected a broader reassessment after the Fed leadership announcement from the White House late last week. Analysts described the action as a correction following last week’s record-setting rally rather than a fundamental shift in demand for precious metals as an inflation hedge.
Dhar stuck with a fourth-quarter gold price forecast of $6,000 an ounce in a research note even as he highlighted ongoing dollar strength as a headwind. “The decision by markets to sell precious metals alongside U.S. equities suggests investors view Warsh as more hawkish” he stated. The strategist noted that longer-term factors supporting gold including geopolitical risks and central bank buying remained intact.
The decline began in earnest on Friday with the steepest one-day drop in spot gold since 1983 and silver’s largest daily percentage loss on record at 27 percent. Trading volumes surged as speculators adjusted positions amid the policy signals from Jackson Hole and fresh economic data. Figures from Investing.com showed gold futures settling near $4,504 an ounce after fluctuating between session highs above $4,685 and lows near $4,516.
