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RONNY HARTMANN/AFP/AFP
In recent market developments, precious metals like gold and silver took a dive on Friday, while European stock markets saw an upward trend. A key factor in this fluctuation was the announcement of US President Donald Trump’s choice to lead the Federal Reserve. This inscription into the financial landscape comes with mixed signals for investors, evoking sentiments of both hope and concern.
The decline in gold and silver prices seemed to stem from reports signaling Trump’s intent to nominate former Fed official Kevin Warsh as the new head of the Federal Reserve, replacing Jerome Powell. With both gold and silver being traditionally viewed as safe havens during times of uncertainty, their drop indicated a shifting appetite among investors.
Trump’s affirmation of Warsh came through a post on Truth Social where he expressed high confidence in his choice. “I have known Kevin for a long period of time, and have no doubt that he will go down as one of the GREAT Fed Chairmen, maybe the best,” Trump declared. His enduring faith in Warsh underscores the potential impact of this appointment on the Federal Reserve’s credibility and independence.
Kathleen Brooks, a research director at XTB trading group, echoed this sentiment, noting that Warsh’s appointment might instill hope that the Fed’s independence could be safeguarded despite the political turbulence surrounding it. The ongoing scrutiny and criticism directed at Jerome Powell from Trump have left many investors wary about the Fed’s ability to maintain its autonomy, which is crucial for managing inflation risks within the US economy.
The immediate effects on precious metals were stark. Gold plummeted to $5,130.80 an ounce after reaching a record high of $5,595.47 just the day before. Similar drops were seen in silver, which had reached an astounding peak of over $120 an ounce but reverted to $103.49 an ounce as the markets processed the news. This volatility illustrates how quickly the market can react to political developments.
This week was not merely characterized by shifts in precious metals; broader financial markets found themselves undergoing a rollercoaster ride. A mix of a weaker dollar, escalating tensions in the Middle East, and threats of tariffs from Trump have enveloped the trading environment in uncertainty. The potential of another US government shutdown looms, adding another layer of instability for traders to navigate.
Asian markets, in particular, faced considerable declines following Wall Street’s tech-led retreat on Thursday. However, the buoyancy witnessed at the start of the week, bolstered by encouraging earnings results from tech giants like Meta and Samsung, quickly diminished. The primary trigger for the retreat was Microsoft’s announcement regarding a significant increase in spending on AI infrastructure, which drew intense scrutiny and raised concerns about whether companies could quickly recoup these hefty investments.
Valuations of tech firms have been a point of contention as fears mount that market growth has outstripped underlying economic realities, leading some to suggest that we may be witnessing a bubble. With tech stocks previously driving market records to unprecedented heights, the current unease suggests that traders are beginning to question the sustainability of these valuations.
Additionally, Friday saw a fall in oil prices. After a surge attributable to geopolitical tensions linked to threats of military action against Iran, traders adjusted their positions in light of new information. The fluctuation in oil prices serves as a poignant reminder of how global politics can influence commodity markets.
– Key Figures around 1200 GMT:
London – FTSE 100: UP 0.5 percent at 10,223.62 points
Paris – CAC 40: UP 0.8 percent at 8,136.20
Frankfurt – DAX: UP 1.0 percent at 24,565.12
Tokyo – Nikkei 225: DOWN 0.1 percent at 53,322.85 (close)
Hong Kong – Hang Seng Index: DOWN 2.1 percent at 27,387.11 (close)
Shanghai – Composite: DOWN 1.0 percent at 4,117.95 (close)
New York – Dow: UP 0.1 percent at 49,071.56 (close)
Euro/dollar: DOWN at $1.1949 from $1.1962 on Thursday
Pound/dollar: DOWN at $1.3779 from $1.3800
Dollar/yen: UP at 153.89 yen from 153.04 yen
Euro/pound: UP at 86.71 pence from 86.67 pence
Brent North Sea Crude: DOWN 0.8 percent at $69.09 per barrel
West Texas Intermediate: DOWN 0.7 percent at $65.03 per barrel
