Gold and Silver Retreat After Record Surge as Markets Reassess Policy

Remy: What goes up must come down. Gold and silver coming back down to earth. After hitting records just last Thursday, on Friday they had their worst day since 1980, with silver futures dropping over 30%. And they are in today's session slightly higher, with gold above the $4,800 level and silver hovering around $80. Now CME Group announcing margin requirement hikes on precious metals futures. And President Trump nominated Kevin Warsh to be the next Fedchair which makes investors more certain the fed will keep its independence. While Warsh is a former Fed board governor and he's known as an inflation hawk that favors fed independence and lower rates. As for metals, they could consolidate and move higher again if the U.S. dollar weakens and geopolitical tensions heat up. Trump also announced Project Vault, which is a $12 billion plan to reduce reliance on China for rare earth. Well, joining me as we head into the trading week and a new trading month is Jeff Gitterman, managing director at Gitterman Asset Management. Jeff, great to have you here. Thank you so much for joining me.

Jeff: Morning.

Remy: Well, first and foremost, let's take a look at precious metals. We are seeing gold hovering around $4,800. After clearing that $5,500 level last week. So what's going on here?

Jeff: I mean, we just got over-exuberant, if that could be the word for it. I mean, if you look at it, we took a year and a half, two years to get up to that $4,800 level went from $4,800 at the end of the year to $5,500 in less than four weeks. That's a little absurd for gold. Silver up 138%. We needed some retracement. There was a lot of leverage in those bets. A lot of these ETFs right now that are pushing volumes up and Warsh announcement. then the London exchange open laid those two things on Friday really triggered also margin requirements went up again on the announced on Friday.

They go up again today for those precious metals. So all of that combined squeezed out a lot of those leverage plays I don't think anything around the fundamentals of why these things are going up though, is changed. Trump's not going to change the geopolitical tack that he's been taking around the world. The demand for these metals is not going down the race. Aside from really gold and silver, copper, the other metals. Those demands are still there and still increasing regularly.

Remy: Yeah. And you mentioned the other metals as well. We've been watching silver as well as copper as they also reach record levels. But when we take a step back and look at the outperformance of precious metals compared to equities at the end of last year, this is just a continuation. So what do you make of the arguments as well as narratives surrounding the debasement trade?

Jeff: It's twofold. The debasement trade is not going away. They need a weaker dollar to be able to afford the deficit. They need rates down. I know he put Warsh in, but he's best friends with Warsh's dad. I mean, not actually dad, but his wife's father. There's a lot of reasons to think that whoever Trump is bringing into his inner circle is going to support his policies. We haven't seen things like back in the 2016 elections where they did. So I would say that the debasement trade is in and it's going to continue. Maybe we're off of invading Greenland today, but we're not going to stop in the way that he's handling geopolitics. So the debasement trade is there and the demand for metals is going to stay as long as there's geopolitical uncertainty that's driving gold. We're seeing gold a little bit back up today after the squeeze on Friday. I think you'll see all of that continue.

Remy: Yeah. And speaking of which, of course there are concerns about the reshuffling of a global order and a dollar alternative. But what's the reality here?

Jeff: Look, it's really hard to think about actually replacing the dollar. But we're seeing a lot of driven demand from other countries in BRICs for a replacement. I think the crash of Bitcoin over the last couple of months is the reality that that's not going to happen that fast. So if the dollar is going to stay, it's going to continue to debase. What do you want to own? You want to own gold? Imean, on Friday, gold past the Treasury market in terms of total assets, 5.3 trillion or something. So when you look at that reality and gold pays no interest, it's a trade that's there because of the debasement trade. It's not going the way just because some leverage got squeezed out on Friday.

Remy: Yeah. And I do want to get your take on the potential impact of the central bank, the Fed Reserve under Warsh. So what could be the potential impact when it comes to the U.S. economy here?

Jeff: I mean, I don't think it's bad. I think it hopefully brings a stable voice to the market and not someone that's going to drop rates three, four times. I mean, we saw the fed pause last week. I think you'll see maybe two cuts in 2026 and the maximum with Warsh at the helm. I think that's good for the overall economy. That's another reason. You know gold went down because the inflation overheated. Trade kind of pause for a moment. Yeah. But again, I think the fundamentals stay. And I think gold is still going to be held by people because of geopolitical reasons. But for the economy, I think it was a good call honestly.

Remy: Less than 60s here, But of course, when we're talking about currencies as well as gold, we need to talk about rate differentials here. So what is the role of global central banks.

Jeff: I mean they're buying more gold. They keep buying more gold. They keep ordering it and they need it you know in stock. And we don't know. I mean that's one of the biggest questions is, is the gold really there that keeps coming up. But as long as they need it and they're going against the interest rate hedge, I think you're going to see gold continue to climb. I have no doubt that in February we'll be back above $5,000. I said it live. We'll see if it happens, but I'm sure that trend will continue.

Remy: Okay Jeff, always great talking to you. Thank you so much for weighing in. And as always, thank you so much for all of your insights.

Jeff: Thanks for having me on.