Gold and silver prices plunged further on Monday, extending last week’s dramatic sell-off after President Donald Trump nominated Kevin Warsh as the next chair of the US Federal Reserve. The nomination intensified debate over the Fed’s future monetary policy and potential political pressures, prompting investors to reassess positions across precious metals.

Spot gold fell as much as 10% in early trading, while silver tumbled up to 16%, following Friday’s historic decline that marked the largest intraday drop on record for the white metal. The sharp retreat reflected how heavily invested markets had become after months of strong gains driven by geopolitical tensions and expectations of easier US policy.

“Crowded one-sided trades unwind. FOMO and chasing the rally are rarely, if ever, a case of economic fundamentals,” said Marcus Dewsnap, head of fixed income strategy at Informa Global Markets. “Reality seems to have caught up with metals markets after a parabolic rise.”

The sell-off was triggered by Warsh’s nomination, which pushed the US dollar higher and forced investors to reprice expectations for interest rates. “The sharp decline on Friday followed news that Trump intends to nominate Kevin Warsh as the next Federal Reserve chair – a development that boosted the dollar and reinforced expectations of a more hawkish policy stance,” said Ewa Manthey, commodities strategist at ING, alongside Warren Patterson, head of commodities strategy.

Gold and silver are particularly sensitive to US rate expectations, as higher interest rates increase the opportunity cost of holding non-yielding assets. A stronger dollar also makes metals more expensive for overseas buyers. While Warsh has expressed support for aspects of Trump’s agenda, including potential rate cuts, markets do not view him as a strong advocate of aggressive monetary easing.

Investor caution has been visible in exchange-traded funds, with silver holdings falling for a seventh consecutive session to their lowest level since November 2025. Futures data show speculators reducing bullish positions sharply, indicating a broader retreat from the sector. ING analysts noted that managed money net longs in COMEX gold fell by nearly 18,000 lots last week, while silver positions also dropped to their lowest since February 2024.

Mechanical factors have amplified market stress. CME Group plans to raise margin requirements on COMEX gold and silver futures after last week’s swings, forcing traders to post more collateral or reduce exposure. “When a market has risen beyond fundamentals, it doesn’t take much to open the exit door,” Dewsnap said. “There aren’t enough buyers to absorb the selling cascade, which exacerbates the drop.”

Attention is turning to Asia, where Chinese investors traditionally support metals prices during dips. However, with volatility high and the Lunar New Year approaching, participation may be cautious. Analysts say short-term direction will depend on dip-buying from Chinese traders.

For now, the precious metals market remains fragile, closely watching US data for clues on real interest rates and dollar movements. Analysts warn that volatility is likely to remain elevated, with macro uncertainty and expectations around Fed policy continuing to dominate sentiment.

The European Union has announced new sanctions on Iran, targeting human rights abuses and Tehran’s support for Russia’s full-scale invasion of Ukraine. Despite the restrictions, trade between the EU and Iran continues, though at significantly reduced levels. Germany remains Iran’s top trading partner within the bloc.

EU ministers approved the latest measures this week, part of a sanctions regime that dates back to the late 2000s. The EU first imposed sanctions on Iran in 2006 in line with UN Security Council demands, calling on the country to halt uranium enrichment and nuclear-related trade. Tighter measures followed in 2011 in response to ongoing human rights violations, and the sanctions have been renewed annually. The current framework is set to remain in place until April 2026.

Trade between the EU and Iran has not been completely halted. In 2024, the total value of goods traded reached €4.6 billion, according to Eurostat. EU exports accounted for €3.7 billion, while imports stood at €850 million, giving the bloc a trade surplus of roughly €2.9 billion. Trade in services also continued, with two-way flows totaling €1.68 billion in 2023, split between €870 million in exports and €800 million in imports.

Despite ongoing trade, Iran is a minor partner for the EU. In 2024, it represented just 0.1 percent of EU exports to non-EU countries, while its share of EU imports rounds to 0 percent. These figures mark a sharp decline from the mid-2000s, when Iran accounted for around 1 percent of EU trade. The value of trade peaked at over €27 billion in 2011, before falling sharply after sanctions tightened. A brief rebound occurred in 2017 following the 2015 nuclear deal, known as the Joint Comprehensive Plan of Action, but trade has remained close to €5 billion since 2019.

Germany plays a leading role in EU–Iran trade. In 2024, the country accounted for nearly a third of total trade between the EU and Iran. German exports to Iran reached €1.27 billion, while imports were €212 million. Italy followed with a 15.6 percent share, exporting €528 million and importing €185 million. The Netherlands accounted for 13.3 percent of trade, with exports of €607 million and imports of €62 million. Other notable EU partners included Belgium, Spain, France, and Bulgaria.

EU exports to Iran are dominated by machinery and transport equipment, which made up €1.28 billion or 34 percent of total exports in 2024. Chemicals and related products were another major category, at €1.13 billion or 31 percent. Imports from Iran were concentrated in food and live animals (€305 million), chemicals (€188 million), manufactured goods (€180 million), and crude materials excluding fuels (€89 million).

Trade with Iran is governed by the EU’s general import regime, as Tehran is not a member of the World Trade Organization and there is no bilateral trade agreement. While some EU countries, such as Sweden and Luxembourg, import slightly more than they export to Iran, overall trade remains limited and largely symbolic amid ongoing sanctions.

Investors are increasingly turning to gold and other precious metals as global uncertainty continues to rise, though experts caution that bullion is not a guaranteed store of value. After surging more than 15% since the start of the year, gold surpassed the $5,500 milestone earlier this week before slipping around 3% on Friday in early European trading.

The rally in gold, accompanied by gains in silver and platinum, has been fueled by a combination of geopolitical tensions, rising government debt, and uncertainty around interest rates and inflation. Gold is traditionally seen as a safe-haven asset and a hedge against inflation, with its value typically rising when the U.S. dollar weakens. Its physical nature and finite supply also add to its appeal at a time when questions are being raised about the stability of fiat currencies, including the dollar and the Japanese yen.

U.S. policy developments under President Donald Trump have contributed to investor caution. In recent weeks, Trump has made headlines for territorial ambitions in Greenland, hinted at possible intervention in Iran, sought to influence Federal Reserve policy, launched attacks on Venezuela, and threatened new tariffs on trade partners. Analysts say such actions have prompted a “sell America” sentiment in certain markets, pushing investors to diversify away from the greenback.

“Investors previously bought U.S. Treasuries as they were seen as risk-free. But the way some wealth has been weaponised has made countries more cautious in capital allocation,” said Simon Popple, managing director at Brookville Capital. “Dollar debasement helps the gold price.”

Despite these broader economic concerns, analysts note that much of gold’s recent momentum is driven by market psychology. “People are naturally drawn to things they see moving, and gold has had an astonishing rally,” said Chris Beauchamp, chief market analyst at IG. He stressed that while gold has investment benefits, its value is often overstated in the short term, especially since the end of the gold standard in 1971.

Kenneth Lamont, principal in Morningstar’s Manager Research Department, echoed these concerns, comparing gold’s volatility to that of cryptocurrencies. “Both are limited in supply, but both can fluctuate dramatically. The short-term value of either can drop by 30% in a day,” he said.

Historically, gold has performed well over the long term, but analysts caution that its price remains susceptible to swings caused by global events and market sentiment. Friday’s small decline demonstrates that even in a period of strong demand, gold is not immune to pullbacks.

As investors weigh the risks of fiat currency uncertainty against the volatility of precious metals, gold continues to attract attention. Its performance in the coming months is expected to remain closely linked to geopolitical developments, monetary policy decisions, and global economic sentiment.