Gold prices fell on Thursday, while silver dropped by more than 11% as speculators moved to take profits after a two-day rally, with a stronger dollar and easing geopolitical tensions increasing pressure on precious metals as safe-haven assets.

Spot gold declined by 2% to $4,864.36 per ounce as of 09:20 GMT, after falling more than 3% earlier in the session. US April gold futures also dropped by 1.3% to $4,855.80 per ounce.

Spot silver fell by 11.3% to $78.13 per ounce, after dropping by around 17% earlier in the session.

Carsten Menke, an analyst at Julius Baer, said: “This is a delayed effect of the volatility we have seen since last Friday. The market has not yet reached an equilibrium point, which is why we are seeing a new wave of selling after the rebound of the past two days.”

He added that volatility is likely to continue in the short term.

Precious metals have seen sharp moves in recent sessions, with gold and silver recording their biggest losses in decades last Friday after reaching record highs earlier in the same week.

Gold extended its losses to $4,403.24 on Monday, while silver fell to $71.32, their lowest levels in a month, after former Federal Reserve governor Kevin Warsh was nominated to lead the US central bank, easing fears of an overly loose monetary policy stance and supporting the dollar.

However, renewed concerns over escalating tensions between the United States and Iran on Tuesday pushed investors back toward safe-haven assets, lifting metal prices over the past two sessions.

Ole Hansen, Head of Commodity Strategy at Saxo Bank, said: “Heavy selling appeared in the Chinese futures market and on the CME after silver failed to break the resistance level at $90.50.”

He added that weak Chinese demand ahead of the Lunar New Year holiday, along with reports of large short positions by a Chinese investor, worsened market sentiment.

The dollar rose to its highest level in two weeks on Thursday, adding pressure on broader markets, as global equities and commodities — from crude oil to copper — declined with easing geopolitical tensions.

In other metals, spot platinum fell by 6.5% to $2,082.76 per ounce, after having recorded a record high of $2,918.80 on January 26. Palladium also declined by 3.5% to $1,711.69 per ounce.

The euro fell in European trading on Thursday against a basket of global currencies, extending its losses for the second consecutive day against the US dollar and approaching its lowest level in two weeks, as easing inflation pressures on European Central Bank policymakers revived expectations of at least one European interest rate cut this year.

The European Central Bank is due later today to conclude its first monetary policy meeting of 2026, with expectations pointing to another hold in interest rates for the fifth consecutive meeting. The upcoming statement is expected to provide further signals and clarification about the future path of interest rates during this year.

Price Overview

• Euro exchange rate today: The euro fell against the dollar by 0.2% to $1.1783, from an opening level of $1.1807, and recorded a session high at $1.1808.

• The euro ended Wednesday down by 0.1% against the dollar, resuming losses that had paused the previous day as part of a rebound from a two-week low at $1.1776.

Inflation in Europe

Official data released yesterday showed continued easing in core inflation levels in Europe, highlighting reduced inflationary pressures on European Central Bank policymakers.

The headline consumer price index rose by 1.7% year-on-year in January, the slowest pace since September 2024, in line with market expectations of a 1.7% increase, after a 1.9% rise in December.

Core CPI rose by 2.2% in January, the slowest pace since October 2021, below market expectations of 2.3%, after registering 2.3% in December.

European Interest Rates

• Following the above data, money market pricing for a 25 basis point rate cut by the European Central Bank in March increased from 25% to 35%.

• Traders adjusted their expectations from keeping European interest rates unchanged throughout the year to pricing in at least one 25 basis point cut.

European Central Bank

The European Central Bank will conclude later today its first regular monetary policy meeting of 2026, with expectations steady for no change in interest rates. The accompanying statement is expected to offer additional guidance on the future interest rate path over the course of the year.

Expectations are currently stable for keeping European interest rates unchanged at 2.15%, the lowest level since October 2022, for the fifth straight meeting.

The ECB interest rate decision and policy statement are due at 13:15 GMT, followed by a press conference from ECB President Christine Lagarde at 13:45 GMT.

Outlook for the Euro

We expect that if the European Central Bank’s remarks come in less hawkish than markets anticipate, expectations for rate cuts this year will increase, leading to further negative pressure on the euro’s exchange rate against a basket of global currencies.

The Japanese Yen fell in Asian trading on Thursday against a basket of major and minor currencies, extending its losses for the fifth consecutive day against the US dollar and recording its lowest level in two weeks, under pressure from rising speculation about the outcome of Japan’s general election due this weekend.

According to the latest opinion polls in Tokyo, the ruling coalition led by Prime Minister Sanae Takaichi is strongly ahead to secure control of the House of Representatives, which would give the new government a green light to move forward with expansionary plans to stimulate the economy.

Price Overview

• Japanese yen exchange rate today: The dollar rose against the yen by 0.1% to ¥156.98, the highest level since January 23, from an opening level of ¥156.81, and recorded a session low at ¥156.68.

• The yen ended Wednesday trading down by 0.7% against the dollar, marking its fourth consecutive daily loss, driven by election-related speculation.

Japanese Elections

Global markets are turning their attention to Japan ahead of the early general election scheduled for February 8, as Prime Minister Sanae Takaichi seeks voter support for higher spending, tax cuts, and a new security strategy expected to accelerate the strengthening of the country’s defense capabilities.

Opinion Polls

The latest polls indicate a sweeping lead for the ruling Liberal Democratic Party led by Sanae Takaichi, boosting her chances of forming a strong government after the election.

Surveys by Asahi newspaper and Kyodo News suggest the ruling coalition is heading for a decisive victory, with the Liberal Democratic Party expected to exceed the absolute majority threshold of 233 seats, and the coalition with partners potentially reaching around 300 seats out of 465.

Takaichi continues to maintain solid popularity, with recent polls showing government approval ratings between 57% and 64%. Her support is especially strong among younger voters aged 18–29, where approval in some surveys approaches 90%.

Sanae Takaichi

Japanese Prime Minister Sanae Takaichi said on Saturday that yen weakness has positive aspects, in remarks that appeared to contrast with repeated warnings from the Ministry of Finance about possible intervention to support the currency.

During a campaign speech ahead of next week’s election, Takaichi said that despite criticism of the weak yen, it represents a valuable opportunity for export sectors, from food industries to automobiles, as the weaker currency has acted as a buffer against US tariffs and provided tangible support to the economy.

Japanese Interest Rates

• Market pricing for a quarter-point rate hike by the Bank of Japan at the March meeting currently stands below 10%.

• To reprice those expectations, investors are waiting for more data on inflation, unemployment, and wages in Japan.

Outlook for the Japanese Yen

Carol Kong, currency strategist at Commonwealth Bank of Australia, said that a strong performance by the Liberal Democratic Party would encourage Takaichi to push ahead with stimulus plans, increasing the risk of a heavier government debt burden and weighing negatively on Japanese government bonds and the yen.

With Russia still preoccupied with the war in Ukraine and China focused on the Taiwan issue, the United States and its key Western allies — notably the UK, France, and Italy — continue to secure important geopolitical gains across the Middle East and North Africa region. After Moscow lost its main regional ally in Syria, those allies moved quickly not only to strengthen their position there, but also in Libya, which has long been of interest to the Kremlin, especially following the ill-judged — even by Western standards — overthrow of Libyan leader Muammar Gaddafi in 2011.

This time, a more coherent approach toward the North African oil state appears to be taking shape. It is based on expanding the presence of Western oil and gas companies across multiple Libyan sites, then using that economic footprint as a lever of political influence as well. This raises a key question: does the recent return to deepwater drilling in the Sirte Basin after a 17-year pause represent a decisive shift in the plan to gradually reintegrate Libya into the Western sphere of influence — and can that strategy succeed?

The West still has strong fundamentals to build on in Libya’s oil and gas sector. Before Gaddafi’s removal and the civil war that followed, Libya was producing about 1.65 million barrels per day of crude oil, most of it high-quality light sweet crude that is in strong demand across the Mediterranean and northwest Europe. The country also holds Africa’s largest proven oil reserves, estimated at around 48 billion barrels.

Production had been on an upward path in the years leading up to Gaddafi’s fall, rising from roughly 1.4 million barrels per day in 2000, although still far below the late-1960s peak of more than 3 million barrels per day. At that time, Libya’s National Oil Corporation had begun plans to apply enhanced oil recovery techniques to mature fields, with projections to lift capacity by about 775,000 barrels per day viewed as realistic and technically grounded.

At the height of the civil war, however, crude output collapsed to around 20,000 barrels per day. Although production later recovered to just under 1.3 million barrels per day — the highest since mid-2013 — repeated politically driven shutdowns in recent years pushed output down to a little over 500,000 barrels per day for extended periods.

Despite this instability, growing high-level political focus from Washington and its allies on Middle East and North Africa suppliers capable of offsetting Russian oil and gas has revived Western international oil company interest in Libya. This was reflected in the strong response to Libya’s first licensing round since 2011, with more than 40 international oil companies registering interest in 22 onshore and offshore blocks.

These new agreements build on earlier deals by several European firms, including France’s TotalEnergies, which in 2021 agreed to continue efforts to raise production from the giant Waha, Sharara, Mabrouk, and Jurf fields by at least 175,000 barrels per day. The company also agreed with the National Oil Corporation to prioritize development of the North Jalo and NC-98 fields in the Waha concession, with combined potential of at least 350,000 barrels per day.

Later, Shell confirmed it would assess exploration opportunities in Libya, while US major Chevron said it planned to return after exiting the country in 2010.

These moves align with the National Oil Corporation’s goal of raising Libyan oil output to 2 million barrels per day by 2028, supported by the recently reactivated Strategic Programs Office. That office had previously targeted 1.6 million barrels per day before rising political tensions last year disrupted its plans.

Success depends partly on the current licensing round, as between $3 billion and $4 billion in investment is needed to reach the initial 1.6 million barrel per day target by 2026–2027. The 22 offered blocks include key acreage in the Sirte, Murzuq, and Ghadames basins, as well as offshore Mediterranean zones. Around 80% of Libya’s discovered recoverable reserves lie in the Sirte Basin, which also holds most of the country’s production capacity.

Smaller projects that preceded the latest major company entries have already delivered results. Waha Oil Company has said it lifted output by 20% since 2024 through intensive maintenance, reopening shut wells, and drilling new ones. The National Oil Corporation has indicated similar programs helped drive recent national production gains, alongside new discoveries by AGOCO and Algeria’s Sonatrach in the Ghadames Basin and Austria’s OMV in Sirte.

BP signed a memorandum of understanding last year to evaluate redevelopment options for the giant Sarir and Messla onshore fields in the Sirte Basin, along with unconventional oil and gas potential. BP said the deal reflects its strong interest in deepening partnership with the National Oil Corporation and supporting Libya’s energy future.

In the Sirte Basin itself, BP and Italy’s Eni have begun drilling Libya’s first deepwater offshore well in nearly two decades. This step is viewed as more significant than other recent Western moves because deepwater drilling requires long-term capital commitments, political confidence, and security assurances that companies do not accept unless they believe stability and Western alignment are improving.

The project targets the Mtsola exploration area in offshore Block 38/3. BP and Eni each hold 42.5% stakes, while the Libyan Investment Authority holds 15%. The joint venture has committed to drilling 16 additional wells across Libya, both onshore and offshore.

Still, questions remain about whether this marks a decisive Western influence shift. A core problem persists: the underlying drivers of Libya’s repeated political crises — which lead to damaging oil shutdowns — remain unresolved.

The September 18, 2020 agreement that ended a series of economically destructive oil blockades made peace conditional on specific goals, according to Libyan National Army commander Khalifa Haftar, with the UN-recognized Tripoli government agreeing at the time.

The central condition was a lasting settlement on how oil revenues are distributed nationwide. A joint technical committee was meant to oversee oil revenues, ensure fair distribution, prepare a unified budget, resolve allocation disputes, and require the Tripoli central bank to execute approved payments without delay.

None of these mechanisms has been fully implemented. As a result, the core revenue-sharing fault lines remain in place, leaving the door open to renewed unrest and future production shutdowns.