Editor’s Note
This article discusses a sharp, single-day decline in precious metals prices, attributed to market reactions to a potential Federal Reserve leadership nomination. While the piece outlines the reported chain of events, readers should note that such market movements are complex and often driven by multiple concurrent factors.
Global precious metals markets were thrown into turmoil on Friday, experiencing one of their most significant single-day declines in years. The dramatic sell-off, which saw gold and silver prices plummet, was triggered by former U.S. President Donald Trump’s announcement of his choice of Kevin Warsh to lead the Federal Reserve. This nomination sent shockwaves through financial markets, with investors rapidly recalibrating their expectations for monetary policy and inflation.
The immediate consequences were severe. Gold, a traditional safe-haven asset, fell 12% from its recent peak of around $5,600 per ounce, settling around $4,800. This marked its sharpest single-day loss in over a decade, although it maintained a robust year-on-year gain of about 65%. Silver, which had significantly outperformed gold over the past year, suffered an even steeper fall, plunging over 30% to below $80 per ounce—its worst daily drop since 1980. The combined rout wiped an estimated $7.4 trillion from the combined market capitalization of gold and silver in just 24 hours, a figure equivalent to roughly a quarter of the entire U.S. economy.
Analysts quickly pointed to uncertainty surrounding the future direction of the Federal Reserve as the primary catalyst. Prior to Friday’s announcement, both precious metals had seen substantial gains, fueled by growing fears that the Fed’s independence was being compromised, potentially forcing it to maintain artificially low interest rates to help finance growing public debt. This narrative was particularly amplified by Trump’s repeated public criticisms of then-Fed Chair Jerome Powell for his refusal to implement deeper rate cuts.
Kevin Warsh, a former Federal Reserve governor, has a complex history on monetary policy. While he was previously considered a ‘hawk’ on interest rates, often echoing concerns similar to Powell’s regarding the inflationary risks of premature rate cuts, his recent public statements have indicated a shift in perspective. Notably, Warsh had remarked that Trump was “right to be frustrated” by the slow pace of rate adjustments. This nuanced position created fertile ground for market speculation.
Despite Warsh’s recent rhetoric, the market largely interpreted his nomination as a signal that the Federal Reserve would likely maintain its independence and prioritize price stability over political pressures. This perception led to a significant unwinding of what analysts called the “inflation panic” premium that had been baked into precious metals prices. The expectation that the central bank would not be forced to keep rates excessively low, thereby mitigating future inflationary pressures, diminished the appeal of gold and silver as hedges against rising costs.
Beyond the immediate political and monetary policy implications, market observers also suggested that Friday’s massive sell-off represented a long-overdue technical correction. Months of uninterrupted gains had left gold and silver technically overbought, meaning their prices had risen too rapidly without a corresponding increase in intrinsic value or fundamental demand. The high prices presented an attractive exit point for traders, and once sentiment began to shift, selling pressure was significantly amplified, accelerating the decline.
Looking ahead, despite the sharp pullback, many long-term forecasts for the safe-haven assets remain surprisingly optimistic. Analysts argue that the fundamental drivers of the broader precious metals rally—including persistent geopolitical tensions, ongoing inflation risks, trade frictions exacerbated by potential future tariff policies, and the growing U.S. national debt burden—remain firmly intact. These underlying factors are expected to continue supporting demand for gold and silver as safe havens.