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Wild swings that swept through financial markets overnight calmed as Wall Street opened for trading on Monday. U.S. stocks are holding relatively steady following gains in Europe and sharp drops in Asia, while gold and silver prices rallied back from severe earlier losses.
The centre of the action in financial markets was again precious metals, where momentum has suddenly halted after gold’s price roughly doubled in 12 months.
Gold briefly dropped below $4,500 US per ounce in the overnight hours, down more than $1,000 from its high point reached just last week. It later erased much of that loss and pulled back to $4,725.00, down 0.5 per cent from Friday.
Silver’s price has been on an even wilder ride recently, and it pinballed from a nine per cent loss overnight to a three per cent gain.
Gold and silver prices had earlier been surging as investors looked for safer assets to own amid a wide range of worries, including a Federal Reserve that may become less independent, a U.S. stock market that critics say is expensive, threats of tariffs and heavy debt loads for governments worldwide.
Their prices cratered on Friday, including a 31.4 per cent plunge for silver. Some on Wall Street saw it as a result of President Donald Trump’s nomination of Kevin Warsh as the next chair of the Fed, the U.S. central bank.
Warsh’s reputation as a former Fed governor may have raised expectations among some investors that he may keep interest rates high to fight against inflation, which would reduce the need to hide out in gold and silver for protection.
But many on Wall Street are also skeptical of that initial reading and say the expectation from Trump is likely that Warsh will cut interest rates, something the president has been demanding.
The Fed chair has a big influence on the economy and markets worldwide by helping to dictate where the U.S. central bank moves interest rates. That affects prices for all kinds of investments, as the Fed tries to keep the U.S. job market humming without letting inflation get out of control.
The recent swoons for gold and silver are likely more about the washout for some traders who had borrowed money to bet on metals’ prices continuing to soar, rather than a wholesale change in expectations for demand for metals, according to Darrell Cronk, chief investment officer for Wealth & Investment Management at Wells Fargo.
At the outset of the trading day, the S&P 500 edged down by 0.1 per cent and is on track for a fourth straight loss. The Dow Jones Industrial Average was up 111 points, or 0.2 per cent, as of 9:35 a.m. ET, and the Nasdaq composite was down 0.3 per cent.
Big technology stocks weighed on the market, including a 2.2 per cent drop for Nvidia, whose chips are powering much of the world’s move into artificial intelligence technology. The losses were worse in Asia, where AI winners plunged. South Korea’s Kospi fell 5.3 per cent from its record for its worst day in almost 10 months after chip company SK Hynix lost nearly nine per cent.
