Gold Slump Eases as Traders Weigh Unwinding of ‘Crowded’ Bets

Описание: James Steel, Chief Precious Metals Analyst at HSBC, reacts to the overnight decline in gold and silver.

Precious metals clawed back some losses after another heavy selloff in Asian trading hours, as traders took stock of the abrupt unwinding of a record-breaking rally.
Spot gold fell by about 4%, after tumbling 10% earlier, extending its biggest slump in more than a decade on Friday. Silver dipped by 6%, after sliding 16% earlier and posting a record intraday drop on Friday. 
Precious metals had risen to record highs that shocked even seasoned traders. An already-scorching rally accelerated sharply in January, as investors piled into gold and silver on renewed concerns about geopolitical turmoil, currency debasement and threats to the Federal Reserve’s independence. A wave of buying from Chinese speculators added froth to the rally.
“The bottom line is that the trade was way too crowded,” said Robert Gottlieb, a former precious metals trader at JPMorgan Chase & Co. and now an independent market commentator, adding that a reluctance to take further risks would constrain market liquidity.
The trigger for Friday’s dramatic selloff was the news that US President Donald Trump would nominate Kevin Warsh to lead the Fed, which sent the dollar higher and undercut sentiment among investors who had bet on Trump’s willingness to let the currency weaken. Traders regard Warsh, later confirmed as the nominee, as the toughest inflation fighter among the final candidates, raising expectations of tighter monetary policy that would underpin the dollar and weaken greenback-priced bullion.
Chinese traders had reliably driven prices higher in recent weeks, but that flipped on Friday, with gold and silver falling through in the Asian session. That dynamic continued Monday, with precious metals coming under pressure as the Shanghai night market opened at 1 p.m. London time.
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