Stock Buyers Emerge as Gold Selloff Cools Down

Talley Leger, Chief Market Strategist at Wealth Consulting Group, discusses why investors may rotate from defensive assets to cyclicals.

Wall Street kicked off February with mild gains in stocks as losses in gold and silver moderated after Friday’s dramatic selloff in metals that shook markets. Bond yields rose alongside the dollar. Bitcoin jumped.

The S&P 500 halted a three-day slide, with data showing manufacturing activity expanded at the fastest pace since 2022 also helping sentiment. While gold was down 4%, it pared most of an earlier plunge. Oil slid 4.2% as geopolitical risk premiums faded after President Donald Trump said Washington is talking with Iran.

“Commodity price action is more about positioning shakeout of weak or leveraged hands than a change in the fundamental story,” said Darrell Cronk at Wells Fargo. “It’s a market to watch for vulnerabilities and extremes.”

Precious metals had risen to record highs that shocked even seasoned traders. An already-scorching rally accelerated sharply in January, as investors piled into gold and silver on renewed concerns about geopolitical turmoil, currency debasement and threats to the Federal Reserve’s independence. A wave of buying from Chinese speculators added froth to the rally.

Following nearly a year of contraction, the demand-related spike in factory activity is welcome news. Sustained growth would help provide reassurance that manufacturing is on the mend after languishing the past three years.

“Manufacturing activity seems to be emerging from a cold winter,” said Brian Jacobsen at Annex Wealth Management. “We’ve seem signs of life before, only for manufacturing to dip again, but with new orders growing, maybe this revival is real.”

The S&P 500 added 0.5%. A gauge of tech megacaps was little changed. The Russell 2000 of small firms rose 1%. Palantir Technologies Inc. reports results after the closing bell.

Precious metals clawed back some losses after another heavy selloff in Asian trading hours, as traders took stock of the abrupt unwinding of a record-breaking rally.

Spot gold fell by about 4%, after tumbling 10% earlier, extending its biggest slump in more than a decade on Friday. Silver dipped by more than 7%, after sliding 16% earlier and posting a record intraday drop on Friday.

Precious metals had risen to record highs that shocked even seasoned traders. An already-scorching rally accelerated sharply in January, as investors piled into gold and silver on renewed concerns about geopolitical turmoil, currency debasement and threats to the Federal Reserve’s independence. A wave of buying from Chinese speculators added froth to the rally.

“The bottom line is that the trade was way too crowded,” said Robert Gottlieb, a former precious metals trader at JPMorgan Chase & Co. and now an independent market commentator, adding that a reluctance to take further risks would constrain market liquidity.

The trigger for Friday’s dramatic selloff was the news that US President Donald Trump would nominate Kevin Warsh to lead the Fed, which sent the dollar higher and undercut sentiment among investors who had bet on Trump’s willingness to let the currency weaken. Traders regard Warsh, later confirmed as the nominee, as the toughest inflation fighter among the final candidates, raising expectations of tighter monetary policy that would underpin the dollar and weaken greenback-priced bullion.

Chinese traders had reliably driven prices higher in recent weeks, but that flipped on Friday, with gold and silver falling through in the Asian session. That dynamic continued Monday, with precious metals coming under pressure as the Shanghai night market opened at 1 p.m. London time.

“Most buyers who were already sitting on profits had one foot out the door, ready to exit at any moment,” said Jia Zheng, head of trading at Shanghai Soochow Jiuying Investment Management Co. The selloff has been driven largely by bullion-based exchange-traded funds, as well as leveraged derivatives, he said.

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