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
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