SINGAPORE: A broad selloff swept through global commodities markets on Monday, dragging down prices of precious metals, energy, and industrial raw materials as investors reassessed risk following a shift in expectations for U.S. monetary policy.

Gold fell about five percent to its lowest level in more than two weeks, extending losses after both gold and silver hit record highs last week. Silver slid more than seven percent, while oil prices dropped nearly five percent, retreating from multi-month highs. On the London Metal Exchange, copper declined around three percent.

The moves came after U.S. President Donald Trump selected Kevin Warsh to succeed Jerome Powell as head of the Federal Reserve in May, triggering a broad retreat from risk assets late last week and a lift in the U.S. dollar.

"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.

A more hawkish Federal Reserve stance signals interest rates are likely to stay higher for longer, boosting the dollar and raising the opportunity cost of holding non-yielding assets such as gold and silver, dampening their appeal.

"A stronger U.S. dollar is also adding pressure on precious metals and other commodities, including oil and base metals," Dhar added, while noting he is still sticking with a gold price forecast of US$6,000 in the fourth quarter.

Asian equities tracked Wall Street futures lower, as the rout in precious metals set a jittery tone at the start of a week packed with central bank meetings, corporate earnings, and key economic data releases.

Selling pressure intensified after CME Group raised margin requirements on its metal futures contracts, effective from market close on February 2.

Higher margin requirements are typically bearish for affected contracts, as they increase capital costs for traders, curb speculative activity, reduce liquidity, and often force leveraged investors to unwind positions.

The slide began on January 30, when spot gold posted its steepest one-day decline since 1983, plunging more than nine percent. Silver fared even worse, tumbling 27 percent in its most significant daily fall on record.

"The scale of the unwind unfolding in gold today is something I haven't witnessed since the dark days of the 2008 global financial crisis," said IG market analyst Tony Sycamore.

He pointed to leveraged positions being flushed out, cascading stop-loss orders, and panic selling as hallmarks of the sharp moves.

Energy markets were also under pressure on February 2, partly due to easing geopolitical concerns. Prices retreated after Trump said over the weekend that Iran was "seriously talking" with Washington, lowering fears of conflict involving the OPEC member.

Those remarks, along with reports that Iran's Revolutionary Guards had no plans for live-fire exercises in the Strait of Hormuz, pointed to signs of de-escalation, Sycamore said.

Industrial metals faced additional headwinds from high inventories and soft demand ahead of the Lunar New Year holiday in China, the world's largest consumer of metals. Copper and iron ore prices weakened as buyers scaled back activity in the run-up to the break, which begins on February 15.

End-user demand and transaction volumes are expected to remain subdued before the holiday, analysts said.

Elsewhere in commodities markets, Tokyo rubber fell nearly three percent, while Chicago wheat and soybeans declined by about one percent.

"The key question is whether this marks the start of a structural downturn in commodity prices or merely a correction," Dhar said. "We see it as a correction and a buying opportunity rather than a fundamental shift.