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Silver sell-off eases as stocks edge higher, but nervousness is high

Silver sell-off eases as stocks edge higher, but nervousness is high
Silver sell-off eases as stocks edge higher, but nervousness is high

Global shares dropped on Monday as investors rushed to sell precious metals in order to cover losses. This was just before a week filled with corporate earnings, meetings of central banks, and important economic data.

The sale of the stock market

Silver

The price of gold slowed down a bit during the European day but was still on track for its largest two-day drop since at least the 1980s. Last seen at $82 per ounce, the price has fallen around 30% from Thursday's closing.

Dealers reported that pressure on silver futures funds from China contributed to the crash late last week. The CME raised margins for a variety of futures contracts including silver and gold on Monday.

The oil prices fell by nearly 5% after President Donald Trump announced that Iran had been "seriously speaking" with Washington over the weekend, possibly reducing the risk of an American military strike against the country.

The last European share price increase was?0.4%. This is after a daily loss of 0.7%, as precious metals reduced their losses. A

The dollar's rise on Friday was a result of Trump's nomination of Kevin Warsh, whom many view as less friendly to ultra-loose monetary policies. This impacted Wall Street stocks and compounded a fall in silver prices that had already begun.

SILVER FRENZY

Silver prices had nearly doubled in just six weeks, reaching a record of $121.64 per ounce in January 29. This unprecedented rally was fuelled by investors' appetite for non-dollar investments, and retail traders' enthusiasm for lucrative returns.

Ole Hansen is the head of commodity strategy for Saxo Bank. He said, "There has been a huge retail frenzy in these markets. We've seen record turnover on options markets relating to silver products." Hansen? emphasized that those who sell options which give holders the right to purchase silver must have a position in silver.

He said: "When the market turns around, the only reason to hold (that position) is gone."

Spot gold was down by 2%, after hitting a record of $5,594.82 per ounce in the previous week.

Investors are waiting to see if billions invested in artificial intelligence will begin to pay off.

DOLLAR STEADIES as YEN SLIPS

The dollar was steady, trading at 154.8 yen against the dollar, and the euro was slightly positive, at $1.186. This is a slight recovery from Friday's drop of 1%. Following Trump's announcement that Warsh would be the next chairman of the central banks, the dollar rose by the most since May last year.

Warsh is not expected to be as aggressive in reducing rates as some of his competitors, but he recently stated that he believed a looser monetary system may be needed, which aligns with Trump’s view that borrowing costs must drop quickly.

Ray Attrill is the head of FX Strategy at NAB. He said that Trump would not have nominated Warsh for his nomination if he did not support lower interest rates. There is ample evidence to show that Warsh believes in higher non-inflationary rates of growth.

The traders are still betting on two rate cuts by the Fed in this year. However, Friday's non-farm payrolls data could change their bets if it comes out significantly higher or lower than forecasts. On Thursday, the European Central Bank will meet with the Bank of England. However, neither bank is expected to change its monetary policy. This week, the Reserve Bank of Australia could also raise interest rates.

Brent crude fell 4.7% to $66 per barrel as the threat of a military attack on Iran, a major oil exporter, waned. Wayne Cole reported; Stephen Coates, Emelia S. Sithole-Matarrise, and Chizu Nomiyama edited.

(source: Reuters)