Introduction: Gold and silver slump in ‘metals meltdown’
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Commodity, precious metals and crypto asset prices are all sliding today, as the record-breaking rally in gold and silver cools.
Financial markets have begun the new week in a volatile mood, with analysts talking about a “metals meltdown” that is also rattling the equities markets.
Gold is falling back after a months-long rally drove it to a series of record highs. It’s slumped by over 8% so far this session, down to $4,465 a ounce, having hit a record high of nearly $5,600/oz just last week.
Silver is living up to its nickname of the “Devil’s Metal” (for its volatility) – it has slumped by 13% today.
Both gold and silver tumbled last Friday, the day in which Donald Trump said he would nominate Kevin Warsh to be the next chair of the Federal Reserve.
Michael Brown, senior research strategist at Pepperstone, says:
Certainly, the final trading day of January was anything but calm, being dominated by what can only be termed a meltdown in the metals space. In terms of ‘scores on the doors’, spot gold ended Friday with losses of 9%, bullion’s worst day since 2013, and fourth worst in the last 45 years.
Silver, meanwhile, shed as much as 35% at the lows, before trimming losses to end the day a still-chunky 26% lower, the worst daily loss ever, at least per Bloomberg data.
Warsh does have a reputation as a more hawkish policymaker than rival candidates, who wants to shrink the Fed’s balance sheet, so investors may be anticipating tighter monetary policy than expected (although Trump is already joking about suing Warsh if he doesn’t lower interest rates).
Vivek Dhar, a commodities strategist at Commonwealth Bank of Australia (CBA), explains:
“A stronger U.S. dollar is also adding pressure on precious metals and other commodities, including oil and base metals.”
“The decision by markets to sell precious metals alongside U.S. equities suggests investors view Warsh as more hawkish.”
But.. KCM Chief Trade analyst Tim Waterer argues the selloff goes deeper, explaining:
“The Warsh nomination, whilst likely being the initial trigger, did not justify the size of the downward move in precious metals, with forced liquidations and margin increases having a cascading effect.”
The agenda
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7am GMT: Nationwide house price index for January
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9am GMT: Eurozone manufacturing PMI for January
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9.30am GMT: UK manufacturing PMI for January
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11.45am BST: Bank of England governor Sarah Breeden gives speech on ‘Next generation UK retail payments’
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3pm GMT: US manufacturing PMI for January
Key events
UK manufacturing accelerates: what the experts say
Martin Beck, chief economist at WPI Strategy, says the restart of activity at JLR’s factories after last year’s cyber attack boosted manufacturing in January:
“January’s UK manufacturing PMI offered a tentative note of optimism, rising to a 17-month high of 51.8, up from 50.6 in December. The output sub-index improved more modestly, reaching the joint highest since September, while export orders moved into expansionary territory for the first time in four years.
“Part of January’s improvement may reflect Jaguar Land Rover’s restart of production in late-2025 following last year’s cyber-attack, which is likely continuing to provide some temporary support to the headline PMI. And historically, the link between PMI surveys and official data has been imperfect, so a stronger performance from the former may not necessarily be reflected in the latter.
“Even so, the latest survey reinforces our above-consensus view on near-term UK growth. Despite ongoing concerns around geopolitics and rising business costs, confidence among manufacturers improved markedly at the start of the year, suggesting firms are seeing the outlook as less bleak than at any time since before the autumn 2024 Budget.
Richard Powell, partner at MHA warns that costs are rising:
“January’s PMI figures reflect a sector that is seeing light at the end of the tunnel. The PMI has risen for the fourth consecutive month, suggesting that it is turning a corner. However, there are still signs that it is weighed down by uncertainty, particularly around the geopolitical arena, which continues to play on manufacturers’ minds. That uncertainty may already be denting sales, though if the index holds in the low 50s it remains a broadly positive signal for the start of the year.
We saw momentum building towards the end of last year, and there is underlying optimism across the sector. But manufacturers are clear: they need stability and confidence to invest. Rising energy costs and upward pressure on employment bills show no sign of easing, and the incoming Employment Rights Bill risks adding further regulation and red tape at a time when businesses are asking for support, not additional burden.
Fhaheen Khan, senior economist at manufacturing body Make UK, fears that 2026 will be “one of the most expensive years ever to run a business in the UK”:
“Manufacturing activity is finally moving at a pace deemed worthy of its optimism, taking advantage of the much needed stability in the policy environment since the Budget. Until recently, many businesses had paused investment due to cost uncertainty, though it is unfortunate that cost cutting measures are favouring job losses which will lead to a new headache for the Government.
“Make no mistake this will be one of the most expensive years ever to run a business in the UK. Manufacturers must still navigate the rising cost of labour, high energy prices and trade uncertainty whilst facing pressures to raise wages even in a loosening labour market. While certainty in the policy environment can improve demand conditions and aid business recovery, just so long as businesses are able to get on with their day to day there remains grounds for optimism. It remains imperative for Government to deliver a successful industrial strategy which can support output expansion and, whilst we know the intent is there, without material, bold and decisive action our ambitions for economic growth will not be realised.”
UK factory growth hits 17-month high
Breaking: the UK manufacturing sector is growing at its fastest pace in almost 18 months, in a boost to chancellor Rachel Reeves.
Data firm S&P Global has reported that its Manufacturing PMI, which tracks activity in the sector, rose to a 17-month high of 51.8 in January (anything over 50 shows growth).
Purchasing managers reported that new export orders rose for the first time in four years, with business optimism at its highest level since before Reeves’s first budgest in autumn 2024.
Output and new export business all increased too, with reports of higher sales volumes to Europe, the US, China and several emerging markets.
Companies also reported a small acceleration in their input costs, partly due to rising costs of raw materials such as metals (so today’s tumble in copper, tin and zinc might be a relief!). The prices of energy, food products, freight, packaging and plastics were all reported as rising in price too..
Rob Dobson, director at S&P Global Market Intelligence, says:
“UK manufacturing made a solid start to 2026, showing encouraging resilience in the face of rising geopolitical tensions. Rates of output and order book growth accelerated, while new export business rose for the first time in four years, with Europe, China and the US the main recipients.
There was also a positive bounceback in business confidence, which rose to its highest level since before the 2024 Autumn budget, as manufacturers focussed on opportunities lying ahead despite persistent concerns about the geopolitical environment, Government policy and tariff tensions.
There was also encouraging news on the jobs front. Although the strongest rise in new business for almost four years was insufficient to fully quell reductions to staff headcounts, the rate of cutting slowed to its weakest since job losses started 15 months ago.
Cost pressures are creeping higher though, as the pass through of the increased Minimum Wage and employer NI contributions continue to work through the supply chain alongside the rising costs for commodities such as metals.
Today’s market mayhem is an uncomfortable backdrop for the Bank of England to be setting interest rates.
The BoE’s monetary policy commitee is due to set borrowing costs at noon on Thursday, with the City expecting them to hold Bank Rate at 3.75%.
Goldman Sachs analysts James Moberly and Sven Jari Stehn predict a 7-2 split, with policymakers Swati Dhingra and Alan Taylor voting for a cut.
They told clients:
Looking ahead, we continue to think that weaker labour market data will push the MPC to cut in March, June, and September to a 3% terminal rate, close to our estimate of the neutral rate but below market pricing. That said, uncertainty around the timing of cuts is high, and firmer data would likely result in a more drawn-out easing cycle.
Eurozone manufacturing improving ‘at a snail’s pace’
New data shows the eurozone manufacturing sector shrank last month, despite a pick-up in output.
S&P Global’s monthly poll of purchasing managers has found that new factory orders fell in January, as firms reduced their buying quantities and continued to cut jobs.
This left the HCOB eurozone manufacturing PMI at 49.5, up from December’s 48.8, but still below the 50-point mark showing stagnation.
The HCOB eurozone manufacturing PMI output index rose to a three-month high of 50.5.
Dr. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, says there are some encouraging signs from Greece, France, and Germany:
“Some progress can be seen in the manufacturing sector, but it’s happening at a snail’s pace. After dropping in December, production ticked up slightly at the start of the year, essentially continuing the growth path we saw between spring and fall last year.
Order intakes haven’t been much help, though — they fell again, even if not quite as sharply as at the end of last year. Right now, it’s hard to say what might put an end to the ongoing rundown of inventories, which makes a strong shortterm upswing rather unlikely.
Still, when looking twelve months ahead, companies are feeling a bit more upbeat than last month about expanding their production.”
Scaramucci: market has decided that Warsh is Volcker
Financial Anthony Scaramucci believes the market selloff is triggered by the choice of Kevin Warsh to run the Federal Reserve (confirmation by the Senate notwithstanding).
Scaramucci, who briefly served as Donald Trump’s White House communications director in 2017, has posted that “The market has decided that Kevin Warsh is Paul Volcker”.
That’s a reference to the hawkish Fed chair of the 1980s who hiked interest rates to tame inflation.
The market has decided that Kevin Warsh is Paul Volcker.
— Anthony Scaramucci (@Scaramucci) February 2, 2026
Actually, Warsh’s problem may be that he pushes for lower rates (as demanded by the White House) but finds that other the Fed policymakers won’t pay ball….
Stocks on Wall Street are set to slide when trading begins in five and a half hours time.
The S&P 500 share index is down 0.7% in the futures maret, while Dow Jones industrial average futures are 0.4% lower.
The tech-focused Nasdaq is on track for a 1% fall.
Susannah Streeter, chief investment strategist at Wealth Club, says:
Investors are digesting Trump’s appointment of Kevin Warsh and expectations of a slightly more hawkish attitude from him compared to the other candidates who had been under consideration.
Although interest rate cuts are still expected this year, if there’s a sharp return of inflationary pressures, the Fed looks more likely to hold. A higher interest rate environment can depress the value of future earnings and dent the allure of tech stocks.
Concerns about AI demand holding up are also still swirling, which continue to put some pressure on high valuations.’’
Government bond prices are strengthening, a little, as investors ditch riskier assets today.
This has nudged down the yield (or interest rate) on 10-year UK bonds to 4.504%, a drop of 2 basis points (0.02 percentage points).
Two and five-year UK gilt prices are also higher, pushing their yields lower.
US Treasury bond prices are also strengthening, pushing down borrowing costs on that side of the Atlantic (yields fall when prices rise).
MUFG: dollar debasement fears ease after Trump picks Warsh
Easing of “debasement” fears are helping the US dollar to rebound, says Lee Hardman, currency analyst at Japanese bank MUFG.
The “debasement trade” had been pushing up gold, silver and bitcoin for months – but the choice of Kevin Warsh is undermining it.
Hardman told clients this morning:
The US dollar has continued to rebound during the Asian trading session after it was confirmed at the end of last week that President Trump will nominate former Fed Governor Kevin Warsh to be the next Fed Chair.
It has triggered a partial reversal of the US dollar sell-off at the start of this year triggered by heightened US policy uncertainty. The dollar index has risen back above the 97.000-level overnight moving further above the low of 95.551 recorded on 27th January.
The worst performing G10 currencies overnight have been the Australian and New Zealand dollars and the Norwegian krone. Weakness in those currencies has been reinforced by the sharp correction lower in commodity prices particularly in precious metals
How did Trump’s decision to nominate Kevin Warsh as Fed chair spark the selloff in metals prices since Friday?
The key is that the US dollar strengthened, having weakened for weeks as investors anticipated a more dovish choice who could be relied on to cut interest rates as Trump demands.
As precious metals are priced in dollars, that pushed prices down – triggering losses on leveraged bets that gold and silver would keep rising.
Lale Akoner, global market analyst at eToro, explains:
“Gold fell nearly 20% from its peak in two sessions, while silver erased all year-to-date gains, including a historic 16% intraday decline. The selloff reflects an unwind of crowded positioning, not a shift in fundamentals.
“The rally had become over-owned through bullion ETFs, leveraged futures and call-option structures that mechanically amplified upside. News that Kevin Warsh could be nominated as Fed Chair strengthened the dollar and shifted policy expectations, triggering forced selling as liquidity thinned.
“We think that fundamentals remain intact. Central banks continue to anchor demand, with roughly 800 tonnes of buying expected in 2026, increasingly targeted in tonnes rather than value, making demand price-inelastic. Investor and central-bank demand averaged around 750 tonnes per quarter in 2025, well above the ~380 tonnes historically required to support higher prices. Even with some moderation, expected 2026 demand remains comfortably supportive.
The slump in precious metals prices is good news for jewellery makers, at least.
Shares in Pandora – which makes earrings, bracelets, necklesses and rings – have jumped by 9% this morning
Short miners/long jewellers seems to be the ‘trade du jour’
*FRESNILLO SHARES FALL 8.5% AS PRECIOUS-METAL PRICES PLUNGE
*PANDORA JUMPS 8.1% AS SILVER PRICE EXTENDS FALL
— Michael Brown (@MrMBrown) February 2, 2026
Saxo: historic rout in silver
The slump in silver prices was triggered by Donald Trump’s choice of Kevin Warsh to be the next chair of the Federal Reserve, says the strategy team at Saxo.
They add that this then triggered losses on futures contracts, which led to further selling – with silver tumblinng around 28% on Friday.
Saxo say:
A historic rally across precious metals turned into an equally historic rout on Friday, extending into Monday’s session as traders continued to unwind what had become an extremely crowded, one-sided trade.
Silver in particular had, for months, drawn in investors, professionals, and retail participants alike, before the move turned parabolic and increasingly unhinged. That dynamic ultimately set the stage for a sharp correction, as the exit doors proved too narrow to absorb a sudden wave of forced selling. While the initial trigger was the nomination of Kevin Warsh, which helped spark a rebound in the dollar, the depth of the slump was driven by a cascade of futures selling linked to the unwinding of ETF and options positions. The risk of second- and third-round selling remains elevated, particularly with Shanghai — the main engine of recent support — seeing sharp losses, and silver futures currently limit-down and not trading.
Speaking of seas of red….
Mining stocks tumble in London
The UK stock market is indeed falling at the start of trading, as predicted.
The FTSE 100 share index has dropped by 58 points, or 0.57% at the open to 10,167 points.
Precious metals producer Endeavour Mining has plunged by 11%, following the slump in the gold and silver price today, followed by Fresnillo (-7%).
Mining stocks are also among the top fallers, including Antofagasta (-5.3%), Glencore (-3.7%), and Anglo American (-3%).
Oil companies are also sliding, tracking the drop in crude prices overnight – BP and Shell are both down over 2%.
FTSE 100 expected to fall
The UK stock market is expected to fall when trading begins in under 15 minutes.
The FTSE 100 is on track for a 0.6% drop, according to IG’s futures market.
Derren Nathan, head of equity research at Hargreaves Lansdown, reports:
“The FTSE 100 is set to start Monday in the red. Mining stocks are likely to feel the heat as metal prices scramble to find a floor. Oil prices are also trending the wrong way for investors in commodity focussed companies. The silver bubble well and truly popped on Friday after lenders upped their margin calls to speculators. That followed Donald Trump’s nomination of Kevin Warsh, one of the more hawkish contenders in the race, for the top job at the Federal Reserve bank.
There’s no sign of a silver lining this morning either, with another double-digit decline showing on traders’ screens. Gold is following a similar but far less pronounced pattern. In industrial metals, Copper has also seen a flight of speculative funds, although here, the long-term demand runway combined with limited new production set to come on stream should provide some support