Gold (GCJ26) and silver (SIH26) prices were briefly higher in early U.S. trading Monday after dropping to four-week lows overnight and in the aftermath of last Friday’s record-setting session that has the entire global marketplace edgy to start the trading week and the month.
All commodity futures traders on Friday could not help but keep their eyes glued to record-setting price downdrafts and extreme volatility in gold and silver futures. The same could be the case today and for the next few days.
Silver’s 26% plunge on Friday was the biggest on record, while gold dropped 9% in its worst day in more than a decade. Overnight, March silver dropped to a low of $71.20 an ounce, after hitting a record high of $121.785 last Thursday.
April gold futures overnight hit a low of $4,423.20 an ounce after last Thursday hitting a record high of $4,626.80. Both metals had posted solid rebounds from the overnight lows, as of this writing.
The CME Group over the weekend raised margin requirements again for the two metals futures contracts.
Traders in stock and financial markets are also spooked by the mammoth plunges and extreme volatility in gold and silver prices, with global stock markets lower overnight.
Part of the pressure on the metals is due to President Donald Trump last Friday nominating Kevin Warsh to lead the Federal Reserve, which sent the U.S. dollar index ($DXY) higher. Warsh has been known to be more hawkish on U.S. monetary policy.
Some blamed the bloodbath in gold and silver markets on Chinese speculators loading up on leveraged long-side bets using futures and options — and possibly not understanding the potential implications of the huge leverage involved. Bloomberg reported that Chinese metals traders have racked up losses totaling at least 1 billion yuan after one of their counterparties fled the country leaving deals unfinished. Xu Maohua, a metals dealer also known as “The Hat,” went into hiding. He was reportedly central to a network that helped the state-owned SDIC Commodities subsidiary boost sales via irregular deals that skirted Chinese government rules.
The federal government went into a partial shutdown over the weekend while waiting for the U.S. House of Representatives to approve a funding deal Trump worked out with Democrats. The gold and silver markets are seeing some renewed safe-haven demand amid the uncertainty of this matter.
