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Slump in Commodities Rattles Global Markets

On Monday, European stocks opened lower as CME Group raised margins on metal futures, accelerating precious metals selling and prompting risk-asset declines.
Market participants noted that Warsh's recent rate views shifted expectations, as his hawkish past contrasts with his current calls to lower rates, impacting markets.
Across commodities, traders noted that silver plunged around 30% and gold suffered its steepest one-day drop since 1983, with oil dropping nearly 5.5%. Vivek Dhar said, `'The decision by markets to sell precious metals alongside U.S. equities suggests investors view Warsh as more hawkish.'`
Volatility indicators reflected rising nervousness as the VIX volatility index nudged at 20, while losses in precious metals forced investors and traders to sell equities, pushing MSCI's All-World index down 0.5% today.
Signs of geopolitical de-escalation showed lower energy-risk premia on Monday, while high inventories and subdued demand ahead of China’s Lunar New Year pressured copper and iron ore markets after both metals hit records last week.

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"The decision by markets to sell precious metals alongside U.S. equities suggests investors view Warsh as more hawkish," said Vivek Dhar, a commodities strategist at Commonwealth Bank of Australia (CBA). A hawkish Fed signals interest rates will stay higher for longer, supporting the dollar and raising the opportunity cost of gold and silver, dimming their appeal.

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