The slide in the price of gold bullion has continued, with the precious metal trading at $US4738 an ounce at 10:30 am AEDT, marking a 2.5% decline. Last week’s rally lost momentum after US President Donald Trump nominated Kevin Warsh as the new Federal Reserve chair. Gold had reached about $US5600 last Thursday, following a climb to a then-record $US5000 on Monday.
Kyle Rodda, senior market analyst at Capital.com, told The Australian Financial Review that the sell-off was the largest since the 1920s. He explained that the markets welcomed Warsh’s nomination, viewing him as experienced and competent, and reflecting the Trump administration’s emphasis on merit and aptitude over loyalty. Rodda added that this perceived respect for institutional integrity boosted the US dollar and triggered a collapse in precious metal prices, as investors anticipate a credible central bank leadership.
Warsh could introduce major changes at a central bank that heavily influences the global economy and financial markets. He is expected to replace current Fed Chair Jerome Powell when Powell’s term expires in May. Trump, who appointed Powell in 2017, has repeatedly criticized him this year for not cutting interest rates quickly enough.
The retreat in gold prices has also affected other precious metals, with silver falling more than 36% from its peak last week.
