The precious metals markets witnessed a strong rally today, with gold and silver prices rising by more than 5%, thus offsetting the sharp losses they suffered in previous sessions following the announcement of Kevin Warsh’s nomination to head the Federal Reserve (the US central bank).
In trading details, gold continued its strong gains in spot transactions, jumping 6% to reach $4,944.58 per ounce . This significant rise comes after gold had earlier climbed 5.01% to touch $4,893.35, rebounding from its lowest level in nearly a month. It's worth noting that gold reached an all-time high of $5,594.82 last Thursday, reflecting the enormous price volatility currently being experienced in the markets.
The impact of Federal Reserve decisions on markets
To understand the overall context of this price movement, we must consider the traditional inverse relationship between the US dollar and precious metals. The nomination of individuals perceived as having high financial credibility or hawkish monetary policies—such as Kevin Warsh—typically strengthens the dollar, putting downward pressure on dollar-denominated gold prices. However, markets often undergo corrections after these initial overreactions, which explains today's rapid price rebound and return to an upward trajectory.
Exceptional performance for silver and other metals
The rally wasn't limited to gold; silver saw even sharper gains, with its spot price surging a staggering 11.7% to reach $85.93 per ounce . Despite this significant increase, silver is still trading below its all-time high of $121.64 reached last Thursday. This extreme volatility reflects the speculative nature that can sometimes characterize silver trading compared to gold.
As for other metals, platinum saw a slight increase in spot trading, rising 0.6% to $2,134.10 per ounce, after reaching a record high of $2,918.80 on January 26. In contrast, palladium bucked the trend, declining 0.5% to settle at $1,711.
Analysts' view: Return to fair value
Commenting on these movements, Kyle Rodda, senior market analyst at a specialist financial group, said, "It's reasonable to assume this price is close to its fair value, given the irrational market behavior we've seen for several weeks." Rodda noted that current prices are bringing gold and silver back to levels seen in the early part of the second half of January, suggesting a degree of stability after the turmoil.
The analyst added, explaining the impact of the political and monetary factor: “The markets supported Warsh’s nomination by US President Donald Trump as a person with relative credibility, and therefore we saw the dollar move accordingly. This was the spark that ignited the collapse in precious metal prices at the beginning before they rebounded.”.
All eyes are now on the upcoming monetary policies of the Federal Reserve, as gold is considered a safe haven in times of economic uncertainty and a key hedge against inflation and the volatility of paper currencies.
