Editor’s Note
This article describes a sharp sell-off in precious metals markets following a key Federal Reserve nomination. The market reaction highlights how expectations for monetary policy can drive rapid and significant price movements.
Global precious metals markets were plunged 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 selection of Kevin Warsh to lead the Federal Reserve. This nomination sent shockwaves through financial markets as investors rapidly recalibrated their monetary policy and inflation expectations.
The immediate consequences were severe. Gold, a traditional safe-haven asset, plunged 12% from its recent peak of approximately $5,600 per ounce, settling around $4,800. This marked its largest single-day loss in over a decade, though it still maintained a solid year-to-date gain of approximately 65%. Silver, which had significantly outperformed gold over the past year, suffered an even steeper fall, sinking over 30% to below $80 per ounce, its worst daily drop since 1980. The combined debacle erased an estimated $7.4 trillion from the combined market capitalization of gold and silver in just 24 hours—a figure roughly equivalent to a quarter of the entire U.S. economy.
Analysts quickly pointed to uncertainty surrounding the future leadership of the Federal Reserve as the primary catalyst. Prior to Friday’s announcement, both precious metals had experienced substantial gains, driven by growing fears that the Fed’s independence could be compromised, potentially forcing it to keep interest rates artificially low to help finance the growing government 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 regarding monetary policy. While previously considered an interest-rate hawk, often echoing concerns similar to Powell’s about the inflationary risks of premature rate cuts, his recent public statements have indicated a shift in perspective. In particular, Warsh had commented that Trump had “reason to be frustrated” by the slow pace of rate adjustments. This nuanced stance 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 termed 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 policy implications, market observers also suggested that Friday’s sell-off represented a long-awaited technical correction. Months of uninterrupted gains had left both gold and silver technically overbought, meaning their prices had risen too fast without a corresponding increase in intrinsic value or fundamental demand. Elevated 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 safe-haven assets remain surprisingly bullish. Analysts argue that the fundamental drivers behind 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 stores of value.