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Gold and silver prices experienced dramatic declines on Monday as higher margin requirements imposed by CME Group intensified a sharp selloff that began last week following the nomination of Kevin Warsh as the next Federal Reserve chair. Spot gold fell 4.8 percent to $4,630.59 an ounce by early afternoon trading, after tumbling nearly 10 percent earlier in the session, according to market data.
The precious metals rout follows a 9.8 percent plunge in gold prices on Friday, bringing total losses to approximately $900 from the January 29 record high of $5,594.82. Spot silver dropped 9.2 percent to $76.81 an ounce on Monday, after sliding as much as 15 percent earlier in the day. Silver has now declined roughly 37 percent since reaching a record high of $121.64 last week.
Margin Requirements Compound Gold Price Volatility
CME Group announced on Friday that it would raise margin requirements on precious metal futures, with the changes taking effect after Monday’s market close. The decision came as markets grappled with the implications of President Donald Trump’s nomination of former Fed official Kevin Warsh to succeed Chair Jerome Powell in May.
However, analysts have cautioned against interpreting the current selloff as the beginning of a sustained downturn in precious metals. “The conditions do not appear primed for a sustained reversal in gold prices,” said Michael Hsueh, precious metals analyst at Deutsche Bank, in a note. He added that investors “remain highly bid for upside,” pointing to continued volatility rather than a collapse in sentiment.
Speculative Traders Exit Market
Additionally, market observers noted that the sharp decline has pushed out many speculative traders who had entered the market during the recent rally. “Gold and silver are on a rollercoaster ride and when you get to the top of the ‘lift hill’, gravity takes over and you are heading down,” said SP Angel analyst John Meyer.
Meanwhile, the analyst suggested that profit-taking and strategic positioning played a role in the selloff. “We saw some money coming out of ETFs and we suspect some brave hedge funds took it from there,” Meyer said, referring to exchange-traded funds that track precious metals prices.
Dollar Strength Pressures Precious Metals
In contrast to the declining gold price, the dollar index extended gains to reach a more than one-week high, making dollar-priced bullion more expensive for overseas buyers. This currency dynamic added additional pressure to precious metals markets already reeling from regulatory changes and Federal Reserve leadership uncertainty.
Markets are expecting Warsh’s nomination to potentially shift Fed policy toward rate cuts alongside tighter balance-sheet policy. U.S. gold futures for April delivery settled 1.9 percent lower at $4,652.60 an ounce, reflecting ongoing uncertainty about monetary policy direction.
Broader Precious Metals Decline
Furthermore, other precious metals also experienced significant losses during Monday’s trading session. Spot platinum fell by 3.3 percent to $2,091.38 per ounce, while palladium shed 1.4 percent to $1,673.70, according to market data.
The recent volatility has erased most of this year’s gains in gold prices, which had surged earlier in January on safe-haven demand and inflation concerns. However, the rapid reversal has raised questions about whether the precious metals rally was driven primarily by speculative excess rather than fundamental investment demand.
Market participants will be closely monitoring trading activity in the coming days as the new margin requirements take effect and investors assess whether current price levels present buying opportunities or signal further declines ahead. The trajectory of precious metals prices will likely depend on clearer signals about Federal Reserve policy direction under potential new leadership and broader macroeconomic conditions.
