Markets Reel as Gold Suffers Historic Plunge, Dollar Surges on Fed Speculation
U.S. equity markets closed lower on Thursday, pressured by a sharp downturn in growth-oriented sectors and a historic collapse in precious metals. The S&P 500 (SNPINDEX:^GSPC) declined 0.43% to 6,939.03, while the tech-heavy Nasdaq Composite (NASDAQINDEX:^IXIC) fell 0.94% to 23,461.82. The Dow Jones Industrial Average (DJINDICES:^DJI) dipped 0.36% to 48,892.47.
The session's defining story was a brutal repricing in the commodities space. Silver prices cratered by more than 35% intraday—the largest single-day percentage drop on record—before paring some losses. Gold futures followed suit, tumbling as much as 11%. The sell-off, which dragged down mining and financial stocks, reversed a significant portion of the metals' meteoric, multi-month rally, though both remain up for January.
Analysts point to a resurgent U.S. dollar as the primary catalyst. The greenback's strength accelerated following reports that President Trump intends to nominate former Fed Governor Kevin Warsh to chair the Federal Reserve. Markets interpreted the potential selection of Warsh, a frequent critic of post-crisis monetary policy, as a signal that the era of ultra-accommodative interest rates may end sooner than anticipated.
"The market is pricing in a fundamental shift at the Fed," said David Chen, a portfolio manager at Horizon Capital. "A Warsh-led Fed is perceived as far more hawkish. This is a classic 'risk-off' move: the dollar up, gold and growth stocks down."
Elsewhere, megacap technology stocks showed tentative signs of stabilization after a volatile week of earnings. Microsoft (NASDAQ:MSFT) limited its decline to 0.74%, while Apple (NASDAQ:AAPL) edged up 0.46% to $259.48 following its quarterly report. Defensive plays like Walmart (NASDAQ:WMT) and Coca-Cola (NYSE:KO) eked out minor gains, underscoring the day's cautious tone. Lingering skepticism over AI valuations and proposed caps on Medicare Advantage rates continued to weigh on specific sectors.
Trader Reactions: From Shock to Opportunism
The dramatic moves sparked strong reactions from market participants:
Marcus Reed, a veteran commodities trader in Chicago, was blunt: "This is a bloodbath, pure and simple. The algorithms went haywire, but the root cause is political interference at the Fed. Nominating a hardliner like Warsh throws years of predictable policy out the window. It's reckless."
Priya Sharma, a strategist at a New York wealth management firm, offered a more measured view: "While the velocity of the drop is shocking, it's a healthy correction after an unsustainable parabolic move. This doesn't alter the long-term case for gold as a hedge, but it reminds everyone that these assets carry extreme volatility."
Jake Rivera, a retail investor active on trading forums, saw a chance: "Everyone's panicking about silver, but this is the dip I've been waiting for. The industrial demand story hasn't changed. I'm adding to my position on Monday."
Disclosure: Emma Newbery has positions in Apple. The Motley Fool has positions in and recommends Apple, Microsoft, and Walmart.
This market analysis was adapted from reporting by The Motley Fool.