Precious metals, oil lead commodity markets down

Gold slipped 9% to its lowest in more than two weeks, while silver dropped more than 13% after both metals hit records last week

Commodities markets slumped on Monday, led by deep losses in gold, silver, oil and industrial metals as the choice of Kevin Warsh as the next U.S. central bank chair set off a wave of selling in risk assets that sent precious metals tumbling for a second session.

Gold slipped 9% to its lowest in more than two weeks, while silver dropped more than 13% after both metals hit records last week.

Oil, declined almost 5.5%, easing from multi-month highs, and London Metal Exchange copper dropped nearly 5%.

The decision by markets to sell precious metals alongside U.S. equities suggests investors view Warsh as more hawkish, said Vivek Dhar, a commodities strategist at Commonwealth Bank of Australia (CBA).

A stronger U.S. dollar is also adding pressure on precious metals and other commodities, including oil and base metals, added Dhar who is sticking with a gold price forecast of $6,000 in the fourth quarter, however.

On Friday, U.S. President Donald Trump chose Warsh, a former governor of the central bank, to succeed Jerome Powell as head of the central bank in May, sparking selling across stock and commodities markets, while lifting the dollar.

Selling in precious metals accelerated as CME Group hiked margins on its metal futures with effect from Monday’s market close.

An increase in margin requirements is generally negative for affected contracts, as the higher capital outlay can dampen speculative participation, reduce liquidity, and push traders to unwind positions.

The decline began on Friday, with the steepest one-day decline in spot gold since 1983, for a fall of more than 9%, while silver slumped 27% in its largest daily decline on record.

Copper and iron ore markets faced headwinds amid worries over high inventories and subdued demand in the run-up to this month’s Lunar New Year break in China, the world’s biggest buyer of industrial and bulk metals.

The end-user demand and transactions are expected to be sluggish before the holiday, which starts on February 15, analysts said.