Market overview
What a difference a week makes. Monday 26 January and headlines were aplenty of gold breaching the US$5,000 per ounce barrier for the first time—a feat all the more impressive as it was only three months since the yellow metal passed the US$4,000 mark. The rally continued hitting US$5,599 on Thursday and yet by close of play the following day, gold was nursing its biggest daily fall since 1983 to end the week at US$4,915 (intraday, gold dipped to as low as US$4,701). Similar story with silver which topped out at US$121.75 only to end the week at US$87.22 after dropping 27% on the Friday. So much for gold and silver offering stability in a volatile world.
The trigger for the extreme moves? US President Donald Trump, who else? The beginning of the week saw more geopolitical posturing from Trump following the build-up of his ‘big beautiful armada’ in Middle Eastern waters seemingly to carry out strikes against Iran should he give the order to do so. Cue more strong gains by gold and silver.
By the end of the week, specifically Friday, the spotlight was back on the unsettling question over the durability of the Federal Reserve’s (Fed) independence. Perhaps it was the Fed’s decision to keep interest rates where they were at last week’s rate-setting meeting and Chair Jerome Powell’s accompanying commentary that, at current levels, rates were not “significantly restrictive”, that prompted Trump to reveal Kevin Warsh as his nominee to be the next Fed Chair. Regardless, with Warsh being a former Fed governor, his proposed appointment appeared to allay market fears that the next Fed Chair would be all too happy to give Trump want he wants—LOWER INTEREST RATES!
Warsh’s nomination took the wind out of the sails (for the time being) of several of the drivers that have been behind gold and silver’s rapid ascent in recent months: the prospect of lower US interest rates which would make gold more attractive in relative terms; a weakening dollar/de-dollarisation concerns—the greenback rallied on the news; and fears over the erosion of the Fed’s credibility. No surprise then, that investors chose to bank profits. That said, precious metals have become increasingly detached from economic fundamentals in recent months, driven more by sentiment and speculation, both of which can turn quickly.
As for the severity of the fall, that could well have been exacerbated by margin calls. For with central banks reducing their purchases of gold by around a third in 2025 (World Gold Council), it seems hordes of ordinary investors have been the ones piling into the gold trade of late, with many borrowing to do so. With gold prices on the retreat, those facing margin calls would have faced a choice: come up with more cash to top up their accounts; close their gold positions (triggering further gold price falls); or sell other liquid assets such as equities to raise funds. All classic traits of the meme trade. Only this time it is not a distressed stock with a rock-bottom valuation or a crypto currency such as bitcoin, but gold and silver!
Weekly market moves and economic news:
The MSCI All Country World Index (MSCI ACWI) added 1.2% over the week, bringing the year-to-date (YTD) gain to 3.6%.
United States:
A 0.3% rise suggests a relatively uneventful week for the main US stock market. But behind the headline figure, the index set new all-time highs before giving back ground thanks in part it seems to gold trade margin calls. The US market ended the week up 1.4% YTD. For the fifth consecutive week, value (+0.6%) outperformed growth (-0.5%) stocks, meaning YTD value is sitting on a healthy looking 4.5% gain while growth is nursing a 1.5% fall. Small caps fared the worst, off 2.1%, paring the YTD gain back to 5.4%. As for US Treasuries, the 10-year Treasury yield was up one basis point to 4.24% (up seven basis points YTD) while the yield on the 2-year Treasury ended the week eight basis points lower at 3.52% (up five basis points YTD).
Overall, a negative week on the US economic data front. Consumer confidence for January came in at a lower-than-expected 84.5 compared to 94.2 in December, according to the Conference Board. Latest initial weekly US jobless claims were higher than expected at 209,000, although at 1.83m the latest continuing claim number was the lowest it has been since September 2024. Meanwhile December’s producer prices were up 0.5% month-over-month, compared to expectations of a 0.2% increase.
United Kingdom:
A lack of domestic data may have been behind a reversal of fortunes in London’s equity markets with the more internationally focused large caps (+0.8%) outperforming previous high-fliers the mid-caps (-0.2%). YTD mid-caps still lead the way with a 3.7% gain compared to large cap’s 3%. With few economic releases to get stuck into gilts hardly budged with the yield on the 10-year gilt inching one basis point higher to 4.52% (up four basis points YTD). Sterling continued its rise against the dollar, finishing the week at US$1.37 compared to US$1.36, hitting a four-year high in the process.
Europe ex UK:
Better-than-expected eurozone growth wasn’t enough to prevent European stocks from ending the week lower. The MSCI Europe ex-UK Index finished off - 0.4% (+2.2% YTD) despite news the eurozone economy grew 1.5% in 2025, a step-up on 0.9% in 2024 and above the European Commission’s 1.3% forecast. Similar story with the fourth quarter number after gross domestic product expanded by a better-than-expected 0.3% sequentially, maintaining the previous quarter’s growth rate.
An economic growth downgrade by the German government to 1.0% from 1.3% for 2026 likely weighed on sentiment although at 1% this would still be a significant improvement on the 0.2% growth in 2025. The reason given for the downgrade, economic and fiscal measures are taking longer to materialise. Germany’s main index finished off -1.5% (+0.2% YTD); France’s -0.2% (-0.3% YTD); Italy bucked the trend gaining 1.6% (1.6% YTD); while Switzerland finished 0.3% higher (-0.6% YTD). Like sterling, the euro strengthened against the US dollar, ending the week at US$1.19, compared to US$1.18 previously. Finally, the yield on the 10-year German bund fell seven basis points to 2.84% (down one basis point YTD).
