A sharp reversal in precious metals—accelerated by higher futures margin requirements—spilled into equities, oil and crypto as investors recalibrated U.S. policy risk.
Global markets opened the week on a defensive footing after a steep selloff in gold and silver exposed how crowded the “safety trade” had become, and how quickly it can unwind when policy expectations shift. The catalyst was U.S. President Donald Trump’s move to nominate former Federal Reserve governor Kevin Warsh to succeed Jerome Powell as Fed chair, a step investors interpreted as reducing near-term uncertainty about the central bank’s independence—even as it raises fresh questions about the future rate path.
Gold tumbled sharply after recently setting record highs, while silver saw even larger percentage swings, with the move exacerbated by leveraged positioning and forced liquidation. CME Group’s increase in margin requirements for gold and silver futures added fuel, pushing some traders to cut exposure quickly rather than post additional collateral.
The shock did not stay confined to metals. European and Asian equities eased, U.S. equity futures slipped, and economically sensitive commodities moved lower as investors reduced risk. Mining shares were among the hardest hit: Newmont (NEM) and other producers tracked the drop in bullion prices, reflecting concerns that the sector’s recent earnings tailwind from elevated realized prices could fade if volatility persists.
The broader “world” backdrop remains fragile. China’s latest PMI readings signaled a soft start to 2026, reinforcing worries about global demand at a moment when markets were already digesting tighter financial conditions and the possibility of a less accommodative Fed trajectory under new leadership. For investors, the combination of weaker Chinese momentum and a repricing of U.S. policy risk is a potent mix: it tends to pressure cyclical assets, lift the dollar, and compress inflation-hedge positioning that had pushed metals—and related equities—into crowded territory.
In the days ahead, traders are likely to watch for two things: whether precious metals stabilize once margin-driven selling subsides, and whether the Warsh nomination shifts expectations for the timing and magnitude of rate cuts in 2026. Until then, the episode is a reminder that “safe havens” can behave like high-beta trades when leverage and momentum dominate positioning.
