The precious metals bubble may have burst this week, with silver’s sharp losses on Friday sending the group lower.
After hitting a new record of $120 an ounce earlier in the session, silver fell back to $75 during the U.S. afternoon session and is now down 35% for the day. As recently as Sunday, gold had never reached $5,000 an ounce, but it briefly climbed to $5,600 on Thursday but has now fallen back to $4,718, down 12% on the day.
Platinum prices are currently down 24%, and palladium prices are down 20%.
U.S. stocks also suffered a sell-off, with the Nasdaq down 1.25% and the S&P 500 down 0.9%.
In contrast, the cryptocurrency traded somewhat sideways on Friday, holding above Thursday night’s panic lows after plunging earlier in the week. Bitcoin was recently trading around $83,000, having bottomed at $81,000 overnight.
Markets have been volatile all week, but the latest battle appears to have been sparked by President Trump’s selection of Kevin Warsh to succeed Jerome Powell as Fed chairman. Conventional wisdom currently has Wash as a somewhat hawkish pick and therefore likely to trigger a sell-off in risk assets.
Clearing the way for Bitcoin?
Paul Howard, director at trading firm Wincent, said on behalf of many cryptocurrency bulls that the commodity’s parabolic move in recent months has sucked risk capital away from the cryptocurrency market. That dynamic may be changing now.
“Cryptocurrency markets have been a casualty of risk capital inflows into the still-popular commodity trade,” he said. He pointed to the options market’s growing appetite for upside risk in February, with 105,000 BTC calls among the most actively traded contracts.
Howard added: “The outlook is indicative of how many cryptocurrency traders are feeling right now – that their markets are long overdue for a commodities-style catch-up.”
“What would have been a market-positive move appears to have coincided with a broad-based risk sell-off,” Howard said of Kevin Warsh’s nomination. “The reaction may be more of a knee-jerk reaction as the market recalibrates.”