Precious Metals Rout Rattles Global Markets as Investors Seek Shelter

LONDON, Feb 2 (Reuters) – Global markets opened the week on a nervous note as a dramatic plunge in precious metals sent shockwaves through investor sentiment, overshadowing a packed calendar of corporate earnings and central bank meetings.

The sharp downturn in gold and silver, assets traditionally prized for their safety, continued unabated on Monday. Silver prices extended Friday's historic losses, while gold also fell further, erasing a significant portion of their January gains. Dealers pointed to a confluence of factors: forced liquidations, momentum selling, and a dialing back of geopolitical tensions after U.S. President Donald Trump suggested over the weekend that talks with Iran were progressing.

"The 'fear trade' is unwinding rapidly," said Michael Carter, a veteran portfolio manager at Albion Capital in London. "Margin calls are exacerbating the move, and the perceived reduction in immediate Middle East risk has removed a key support pillar. It's a classic risk-off move, but the velocity is alarming."

The commodity crunch extended to oil, with prices dropping nearly 5%, further dampening the mood. The anxiety spilled over into equity markets, with U.S. futures pointing lower and volatility gauges ticking up. The sell-off was particularly acute in Asia, where South Korea's tech-heavy index tumbled 5.5% amid persistent worries over AI-related valuations.

This turbulent backdrop sets the stage for a critical week. Nearly a quarter of the S&P 500 is set to report earnings, with scrutiny intense on tech giants following Microsoft's recent stumble. Meanwhile, central banks in Australia, Europe, and Britain are due to meet, with the Reserve Bank of Australia potentially bucking the global trend by considering a rate hike to combat inflation.

Analysts are divided on whether the metals sell-off signals a deeper correction or a buying opportunity. "This looks like a healthy, albeit brutal, correction after a parabolic rise," noted Sarah Chen, a strategist at Deutsche Bank. "The fundamental case for holding gold, given macro uncertainties, hasn't vanished overnight."

However, not all observers are so measured. "It's a bloodbath fueled by leverage and complacency," argued David Miller, an independent trader based in Chicago, in a sharply worded online post. "The so-called 'safe havens' just proved they're not safe at all. The entire market is built on quicksand, and the Fed nomination is just rearranging deck chairs on the Titanic."

The focus now shifts to a deluge of U.S. economic data, culminating in Friday's non-farm payrolls report, which will test the market's fragile nerves.

Reporting by Marc Jones; Editing by Sharon Singleton. The views expressed are those of the author.