How to trade market spirals where investors dump gold, silver and oil

Losses in precious metals widened on Monday, with analysts and strategists pointing to U.S. President Donald Trump’s choice of Kevin Warsh to replace Federal Reserve Chairman Jerome Powell as the main trigger for the recent economic downturn.

Spot gold traded nearly 2% lower at $4,771.25 an ounce in early trading in Europe, deepening losses from Friday’s historic sell-off, which fell more than 9% and was the steepest single-day decline since 1983.

Spot silver prices were down 1% at $83.81 an ounce around 11:39 a.m. London time (6:39 a.m. ET). The white metal fell more than 31% on Friday, its worst daily performance since 1980.

The deterioration in metals prices has coincided with low oil prices and broader market weakness, with the pan-European Stoxx 600 index tracking declines in Asia-Pacific markets. US stock futures also started the week in negative territory.

“Our thesis so far has been very simple,” Grace Peters, global investment strategist at JPMorgan Private Bank, told CNBC’s “Squawk Box Europe” on Monday.

“When we look at our portfolio, we like to have geopolitical hedges, safe assets, US Treasuries, the dollar, gold, but they don’t all perform the same and we think gold is the best geopolitical hedge,” Peters said.

Gold prices are likely to rise through 2026 due to factors such as central bank purchases and support from institutional investors, Peters said, noting that his team maintains its forecast of $6,500 an ounce by year-end.

Asked about the rationale for investors holding gold, Peters said developed markets are heavily stocked with the yellow metal, but emerging market central banks are not, citing Poland and Brazil as examples.

“If you think about institutional investors, really individual investors, when you look at stocks, bonds and alternatives, gold is just over 3% of (assets under management),” Peters said.

“I think a 5-10% position across the portfolio is viable. If you look at our own client books, they don’t exist in gold,” she added.

Charles Henry Montchaux, chief investment officer at Size Group, said the sell-off began at the end of January after a month dominated by investor concerns that the Fed would soon lose its independence and expectations that the U.S. dollar would continue to fall.

The dollar index of the U.S. dollar against a basket of major rivals rose 0.2% on Monday morning. It has fallen 1.2% so far this year after falling more than 9% in 2025.

“And that led to big trades where you were long commodities, long precious metals, long value, long emerging markets, all of which were clearly leveraged,” Montshaw told CNBC’s “Squawk Box Europe” on Monday.

But the unexpected appointment of Mr. Warsh, who is seen as something of a “hawk-dove,” prompted investors to reconsider. Montchaux said one of the central issues for market participants is Warsh’s insistence on reducing the size of the Fed’s balance sheet.

“As we all know, markets rely on liquidity, and that’s a big stress right now. And there’s a lot of uncertainty around the timing. He needs to be elected to the Fed board, and then he needs to be elected as Fed chair,” Montchaux said.

“There’s also a question mark as to whether Mr. Powell will remain on the board, so there’s a lot of uncertainty, and markets don’t like uncertainty,” he added.

Nitesh Shah, head of European commodities and macroeconomic research at WisdomTree, said gold and silver prices had a clear “tremendous rally” through much of January, exceeding many analysts’ expectations.

“Prices were a little too strong to begin with, and it really only took one catalyst to bring them down, and that was the appointment of Kevin Warsh,” Shah told CNBC’s “Early Edition of Europe” on Monday.

“One of the pillars that supposedly held these metals up has collapsed, because concerns about the Fed’s independence being eroded to something more like a puppet of President Trump have not surfaced, or have yet to surface,” he added.

JPMorgan Private Bank is not alone in ignoring gold’s recent decline. Many analysts remain positive about the metal’s outlook in the coming months.

WisdomTree’s Shah said the dramatic decline in precious metals should be viewed as a “healthy correction” rather than a major decline, and noted that investors should prepare for a few more days of volatility.

Shah said he expects gold prices to reach $5,020 per ounce toward the end of the year, and silver prices to hover around $88 per ounce over the same period. “So there is some upside from where we are today, but we will need to flush out some of the speculative bubbles,” Shah said.

Meanwhile, Deutsche Bank analysts reiterated their expectation that gold prices would rise to $6,000 an ounce by the end of the year.

The German lender said in a research note published on Monday that the yellow metal’s thematic drivers appear to have remained unchanged and does not view the latest decline as evidence of a permanent change.

Oil prices also fell on Monday morning after President Trump said the US and Iran were in “serious talks” and suggested tensions were easing as Washington’s “large fleet” moved closer to the OPEC member.

international benchmark brent crude oil futures Crude oil prices for April delivery fell 4.9% to $65.93 per barrel. West Texas Intermediate Futures The final price for March delivery was $61.66, a 5.4% discount.

The drop in oil prices caused oil prices to fall by the most in a single session in more than six months, Reuters reported.

Max Kettner, chief multi-asset strategist at HSBC, said the decline should be seen as an unwinding of positions rather than evidence of market panic.

“If you look at gold or silver or the precious metals complex, for example, one of the questions investors faced throughout January was why is this a risk-on environment when precious metals are going up at the same time?” Kettner told CNBC’s “Early Edition of Europe” on Monday.

“So now that the precious metals have been stripped away, we can’t do the same thing. We can’t say, ‘Okay, precious metals are down.’ That’s also really bad, and it leads to a kind of panic situation.”

“Does it really have a significant impact on equities and credit? Does it impact the earnings outlook? Does it impact the valuation outlook? Not really,” Kettner said.