Gold and silver are fighting to stabilize after a historic market meltdown

• Gold and silver prices remained volatile after Friday's market meltdown.
• President Donald Trump's pick of Kevin Warsh as the next Fed chair hit the debasement trade.
• Both precious metals edged slightly higher on Monday morning after extending their slide earlier.

Precious metals were paring some of their steep losses on Monday, rising after briefly extending a historic sell-off that shook the market on Friday.

Gold was down by less than 1% at around $4,700 per ounce, after tumbling more than 10% on Friday in its worst decline since 2013. Despite the recent pullback, the metal remains up about 10% year to date.

Silver remained highly volatile, falling about 2% to around $77 an ounce after plunging as much as 36% on Friday, the biggest single-day loss since 1980.

The crash in metal markets came after Donald Trump tapped Kevin Warsh to run the Federal Reserve. Warsh is viewed as more hawkish and more likely to preserve the central bank's independence than other candidates.

That outlook hit the debasement trade — pushing the US dollar higher, weighing on dollar-denominated commodities such as gold and silver. As markets open in the US on Monday, though, conditions appear to have stabilized as both precious metals demonstrate an ability to rise above macro-driven volatility.

Most importantly, Warsh supports shrinking the Fed's balance sheet, which would ease fears of a weaker dollar and help explain recent declines in gold and silver prices, wrote Vishnu Varathan, Mizuho's Asia head of research excluding Japan, on Monday in Asia.

Meltdown after historic rally

Before the sell-off, gold had been on a blistering yearlong rally, fueled by heavy central bank buying and geopolitical tensions.

Those forces remain in place and now appear to be provide support, despite previous speculation.

"I think the fundamentals remain pretty well in place despite those risks around Fed independence," Daniel Hynes, a senior commodities analyst at ANZ , told Bloomberg TV, on Monday.

Hynes said broad geopolitical tensions continue to support the gold market, even as he expects price volatility to remain high.

"The general unbending of the world order that we hear about constantly, and the US's role within that, has really been at the crux of this haven buying, and I don't see that ending any time soon," he said.

However, analysts are continuing to warn on silver, whose gains have far outpaced gold in recent months due to speculative Chinese demand.

Ole Hansen, the head of commodity strategy at Saxo Bank, wrote on Friday that gold is susceptible to a pullback amid this month's surge in prices. However, price declines in gold are likely to be met with fresh demand.

But silver may struggle to keep pace with gold. Several finance pros have speculated that it will likely fall in the coming months.

"Its heavy reliance — in normal times — on industrial demand could become a drag as some end users, particularly within the solar sector, increasingly seek alternative materials in order to protect margins," Hansen wrote.

"In addition, a rise in scrap supply is expected in the coming months as owners cash in long-held bars, cutlery and jewellery following a seven-fold increase in prices over the past decade," he added.