Gold and silver prices suffered historic single-day declines on Friday following US President Donald Trump’s announcement nominating former Federal Reserve governor Kevin Warsh to chair the central bank.
Gold fell 12% from its January 29 peak of approximately $5,600 per ounce to around $4,800, marking its sharpest one-day drop in over a decade. Despite the plunge, the metal remains up roughly 65% year-on-year. Silver, which had outperformed gold recently, sank more than 30% to below $80 an ounce, its worst fall since 1980. The combined market value of the two metals dropped by more than $7.4 trillion within 24 hours.
The selloff is widely attributed to the nomination itself. Precious metals had surged for months on investor concerns about potential Fed political interference and prolonged low interest rates to manage US debt. Analysts state that Warsh’s selection was interpreted as a signal that the Fed would maintain its independence and prioritize price stability, thereby removing an “inflation panic” premium from asset prices. While Warsh was previously a monetary hawk, he has recently echoed Trump’s frustration with the pace of rate cuts, adding nuance to his perceived policy stance.
The decline also reflects a technical correction after a sustained rally. Months of uninterrupted gains had left markets technically overbought, and elevated prices presented an attractive opportunity for profit-taking once sentiment shifted.
Despite the sharp reversal, analysts note that underlying drivers for the precious metals rally remain. Geopolitical tensions, persistent inflation risks, trade frictions from US tariff policies, and the expanding national debt continue to support long-term demand for safe-haven assets. Some forecasters maintain bullish outlooks for gold and silver.
The price drop may also influence central bank behavior. The pre-crash rally provided Russia with significant windfall gains on its gold holdings, nearly compensating for frozen sovereign assets. Analysts from major institutions like JPMorgan and Goldman Sachs suggest other central banks may view the correction as an opportunity to expand their bullion reserves at lower prices.
The nomination of Kevin Warsh is pending Senate confirmation. Market reaction indicates that expectations for Fed governance are a critical factor in valuing inflation-sensitive assets like precious metals.
