Editor’s Note
This article discusses the sharp downturn in precious metals markets following the ‘Warsh Shock,’ a significant reversal after a period of record highs. The analysis includes the subsequent impact on related domestic investment products.
The precious metals market, which had been hitting record highs daily, plummeted sharply amid the so-called ‘Warsh Shock’.
Following the sharp decline in international gold and silver prices over the weekend, domestic gold and silver-related Exchange-Traded Funds (ETFs) and Exchange-Traded Notes (ETNs) also fell sharply.
According to the Korea Exchange on the 3rd, KODEX Silver Futures (H) fell to its price limit and closed at the lower limit the previous day. Major precious metal ETFs, including Gold Futures Leverage (Synthetic H), TIGER Gold & Silver Futures (H), HANARO Global Gold Mining Companies, and TIGER KRX Gold Spot, also recorded double-digit declines.
The decline was particularly severe for silver futures leverage ETNs. Silver leverage ETNs from major securities firms, including Mirae Asset Leverage Silver Futures ETN B, Samsung, Hanwha Investment & Securities, KB, and Meritz, plunged nearly 60% in a single day.
These products are structured to track twice the daily return of silver futures, meaning the full impact of silver futures falling over 30% over the weekend was reflected.
On January 30 (local time), silver futures prices on the New York Mercantile Exchange plummeted 31.37%, marking the largest decline since 1980, while gold futures prices also fell over 11%.
The market views the trigger as U.S. President Donald Trump nominating Kevin Warsh, considered to have a ‘hawkish’ tendency, as the next Federal Reserve Chair. Analysis suggests that heightened concerns over monetary tightening led to a rise in the dollar’s value and simultaneous volatility in the prices of risk assets like gold, silver, and Bitcoin.