US Stocks Fall on New Fed Chair, Gold and Silver Crash – Silver down 27%
It was another lively end to the trading week on Friday, with US markets finishing firmly on the back foot after President Trump confirmed Kevin Warsh as his choice for the next Federal Reserve Chair. US equities sold off across the board, with the Dow Jones slipping 0.37% to close at 48,892, the S&P 500 falling 0.43% to 6,939, and the tech-heavy Nasdaq leading the declines, down 0.94% to 23,461. Treasury markets sent mixed signals as stronger-than-expected PPI data competed with the Fed news. The front end of the curve rallied, with the 2-year yield falling 3.7 basis points to 3.522%, while longer-dated yields edged higher, seeing the 10-year tick up 0.4 basis points to 4.235%. The US dollar surged sharply, with the dollar index jumping 0.90% to 97.15. Commodities once again delivered the most dramatic moves. Oil prices were relatively subdued, with Brent easing 0.39% to $69.32 and WTI slipping 0.32% to $65.21. Precious metals, however, were smashed across the board. Gold plunged 8.94% to $4,894.23, marking its largest single-day percentage fall since 1983, while silver suffered its worst day on record in what was a brutal end to an extraordinary run higher.
Precious Metals Experience Worst Days in Decades
Traders had been discussing the meteoric rises in both gold and silver for the past few weeks and last week’s extended moves to yet more fresh highs; however, those moves eventually burst in spectacular fashion on Friday, with gold experiencing its worst one-day fall since 1983 and silver having its worst day ever. Gold lost around 10% on the day, but nearly 14% at its low, and silver dropped 27% on the day but, at one point, was around 37% down from its high. Once again, market commentators are struggling to find the real reason behind these excessive moves, with some touting the announcement of the next Fed Chair in Kevin Warsh as the trigger, but given the much more modest reaction in other markets. Most experienced traders are looking deeper into the structural set-up of the precious metals markets for their answers, with most feeling that answers will start to appear in due course, and that there will be some horror stories from investors and traders alike in the coming days and weeks.
Markets Braced for More Volatility
Looking ahead, traders are bracing for further volatility as Asian markets reopen on Monday. Even with a relatively quiet macroeconomic calendar, Friday’s aggressive price action is expected to spill over into the new week, keeping markets lively across the Asian, European, and US sessions. Asian markets have opened in a relatively calm manner; however, spreads were very wide on the open and remain so even — by multiples of normal levels — five hours after markets started, and traders are confirming that these are not normal market conditions. There is little on the macroeconomic calendar in both the Asian and London sessions today, and just the US ISM Manufacturing PMI (exp. 48.5) and ISM Manufacturing Prices (exp. 59.3) data due out once New York commences, and therefore markets are again expecting sentiment and flow to dominate market moves.
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