How to trade the market spiral as investors dump gold, silver and oil

Precious metals and oil prices extended losses on Monday, with analysts and strategists flagging U.S. President Donald Trump’s choice of Kevin Warsh as successor to Federal Reserve Chair Jerome Powell as a key trigger to the latest downturn.

Spot gold prices traded 3.2% lower at $4,713.39 per ounce during early European trading hours, deepening losses from a historic rout on Friday, when it fell more than 9% to notch its sharpest one-day drop since 1983.

Spot silver prices fell 2.7% at $82.29 per ounce at around 9:54 a.m. London time (4:54 a.m. ET). The white metal fell over 31% on Friday, registering its worst daily performance since 1980.

The worsening metals rout coincides with a broader market downturn, with the pan-European Stoxx 600 index tracking losses from Asia-Pacific markets. U.S. stock futures were also seen starting the trading week in negative territory.

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

“When we’re looking at the portfolio, we want to have geopolitical hedges, safe-haven assets, Treasurys, dollar, gold — are not all performing in the same way and we do think gold is the best geopolitical hedge,” Peters said.

Factors such as central bank buying and support from institutional investors are likely to push gold prices higher through 2026, Peters said, noting that her team has maintained its forecast of $6,500 per ounce by year-end.

When asked about the investor rationale for owning gold, Peters said that while developed markets are loaded up on the yellow metal, emerging markets’ central banks are not, citing Poland and Brazil as examples.

“When you think about the institutional, indeed the retail investors, gold is just over 3% of [assets under management] when you think about equities, fixed income and alternatives,” Peters said.

“I think a 5-10% position across portfolios is where we could feasibly get to, and when we look at our own clients’ books, they are not there on gold,” she added.

Charles-Henry Monchau, chief investment officer at Syz Group, said the sell-off started at the end of January after a month dominated by investor fears that the Fed may soon lose its independence and expectations that the U.S. dollar would continue to slide, among other concerns.

The U.S. dollar index, which measures the greenback against a basket of major rivals, traded up 0.2% on Monday morning. It has shed 1.2% so far this year, after dropping more than 9% in 2025.

“And that led to one big trade, which was long commodities, long precious metals, long value, long emerging market, and so on. All of this obviously paying leverage,” Monchau told CNBC’s “Squawk Box Europe” on Monday.

Yet, the surprise nomination of Warsh, who is seen as something of a “hawkish dove,” prompted a rethink for investors. One core issue for market participants, Monchau said, is that Warsh has advocated for the Fed to reduce the size of its balance sheet.

“As we all know, markets are addicted to liquidity and currently this is the big stress. Also, there are a lot of uncertainties in terms of timing. He needs to be elected as one of the Fed members and then he needs to be elected a Fed chair,” Monchau said.

“There is also a question mark about Mr Powell staying on the board or not … so a lot of uncertainties and the market doesn’t like uncertainties,” he added.

Nitesh Shah, head of commodities and macroeconomic research for Europe at WisdomTree, said gold and silver prices clearly had a “fantastic run” through most of January, exceeding many analysts’ expectations.

“Prices were a little too strong to start with and it required just one trigger, really, to deflate it and that was the nomination of Kevin Warsh,” Shah told CNBC’s “Europe Early Edition” on Monday.

“The fears that the Fed’s independence would be lost by almost a puppet of Trump, didn’t come to the fore, or hasn’t come to the fore yet, and therefore one of the pillars that was supposedly supporting those metals had fallen apart,” he added.

It’s not just JPMorgan Private Bank brushing off gold’s latest downturn. A number of analysts remain constructive on the metal’s outlook over the coming months.

WisdomTree’s Shah said the dramatic sell-off in precious metals should be seen as a “healthy correction” rather than a deeper pullback, noting that investors should be prepared for a few more days of volatility.

Looking to the end of the year, Shah said he expects gold prices to reach $5,020 per ounce, with silver prices set to trade at around $88 per ounce over the same time horizon. “So, there’s upside from where we are today, but a little bit of the speculative froth will need to flush out,” Shah said.

Analysts at Deutsche Bank, meanwhile, reiterated their forecast of gold climbing to $6,000 per ounce by the end of the year.

The German lender said in a research note published Monday that it doesn’t see the latest pullback as evidence of a durable shift, saying thematic drivers for the yellow metal appear unchanged.

Oil prices also took a turn lower on Monday morning after Trump said the U.S. and Iran were “seriously talking” to each other, signaling a de-escalation as Washington’s “massive armada” nears the OPEC member.

International benchmark Brent crude futures with April delivery fell 5% to $65.88 per barrel, while U.S. West Texas Intermediate futures with March delivery were last seen off 5.3% at $61.76.

The moves lower put oil prices on track for their steepest single-session decline in more than six months, according to Reuters.

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

“If you look, for example, at gold and silver or the precious metals complex, one of the questions we’ve been faced with by investors throughout January was, well, how come this is a risk-on environment if precious metals rally at the same time?” Kettner told CNBC’s “Europe Early Edition” on Monday.

“So, by extension, now the precious metals have come off, we can’t have the same thing. We can’t say, OK, precious metals are down. That’s also really bad, and that leads to sort of panic mode,” he continued.

“Does that really have the big, big ramifications for equities, for credit? Does it change the earnings outlook? Does it change the valuation outlook? Not really,” Kettner said.