The SPDR Gold ETF (GLD) experienced a sharp pre-market decline of 7.71% on Monday, extending a severe sell-off in the precious metals market that began late last week. The move reflects heightened volatility as investors reassess the outlook for monetary policy and gold's safe-haven appeal.
The downturn was primarily triggered by market expectations surrounding the nomination of Kevin Warsh as the next Federal Reserve Chair. Analysts note that Warsh is perceived as having a relatively hawkish stance and a stronger inclination to preserve the Fed's independence, which has weakened market anticipation for accommodative monetary policy and further interest rate cuts. This shift in policy expectations has reduced gold's appeal as an inflation hedge and alternative to dollar-denominated assets.
Additionally, the decline was amplified by concentrated profit-taking after gold prices had surged to historic highs earlier in the month. The Chicago Mercantile Exchange's decision to raise margin requirements for gold futures further pressured the market, triggering forced liquidations and deleveraging. Concurrently, easing geopolitical risks, including de-escalating U.S.-Iran tensions and resumed U.S.-Venezuela diplomatic talks, have diminished some of the safe-haven demand that previously supported gold prices.
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