Precious Metals Plunge as Warsh Fed Nomination Calms Markets
In a dramatic reversal, gold and silver prices tumbled on Friday, surrendering a significant portion of their recent historic gains. The sell-off was triggered by a wave of investor relief following President Trump's nomination of former Fed Governor Kevin Warsh to chair the Federal Reserve, a move perceived as restoring stability to the central bank's leadership.
Spot gold fell 10% to trade near $4,850 per troy ounce, retreating from a record high of $5,600 set just a day earlier. Silver faced an even steeper decline, plummeting 28% to below $84 an ounce after briefly surpassing the $120 mark. Major exchange-traded funds like the iShares Silver Trust (SLV) and the SPDR Gold Shares (GLD) mirrored these heavy losses.
The sharp pullback follows an extraordinary year-long rally for precious metals, fueled by geopolitical tensions, a persistently weak U.S. dollar, and investors seeking a safe harbor from volatile equities. Gold had surged nearly 90% in the preceding 12 months, while silver had skyrocketed approximately 250%.
Market analysts interpreted Friday's plunge primarily as a profit-taking event, catalyzed by reduced anxiety over the Fed's future direction. Warsh's nomination is seen as a concession to Wall Street's establishment, alleviating fears that President Trump would install a loyalist who might undermine the central bank's independence to pursue aggressively dovish interest rate policies.
"The market is breathing a sigh of relief," said Michael Chen, a portfolio manager at Horizon Capital. "Warsh is a known quantity with Fed experience. This suggests monetary policy will remain data-driven, not politically driven. The knee-jerk sell-off in metals reflects a recalibration of 'fear premium' that had been baked into prices."
The calming effect was felt across markets. The U.S. dollar index, recently at a four-year low, gained 0.7%. Meanwhile, the yield on the 10-year Treasury note edged up to 4.25%, signaling investor expectations for a more conventional rate path under Warsh.
The dollar's weakness over the past year—down over 10% on the index—had been a key tailwind for dollar-priced commodities, making them cheaper for foreign buyers. A potential stabilization in the currency could remove one pillar of support for the metals rally.
The profit-taking wave extended to other precious metals. Palladium, which had doubled in value in the past year, fell 15%, while platinum dropped 20% after nearly tripling in price.
Market Voices
David Miller, Chief Strategist at Sterling Wealth Advisors: "This is a healthy correction, not a trend reversal. The macro drivers for holding gold—deficit spending, geopolitical risk—haven't vanished. Investors are simply taking money off the table after a parabolic move. It creates a better entry point for long-term portfolios."
Sarah Jenkins, Independent Commodities Trader: "It's absolute madness! One headline from the White House and 25% of silver's value evaporates? This proves the entire rally was built on speculative froth and leverage, not physical demand. The so-called 'safe havens' just proved they're among the riskiest trades out there right now."
Arjun Patel, Economist at Global Insight Forum: "The reaction underscores how sensitive markets are to institutional integrity. The Fed's perceived independence is a cornerstone of global financial stability. Warsh's nomination, while surprising to some, reassures that cornerstone is still standing. The sell-off is a direct function of that restored confidence."