Precious Metals Plunge: Gold and Silver See Sharpest Drop in Decades Amid Policy Shifts
Precious Metals Plunge: Gold and Silver See Sharpest Drop in Decades Amid Policy Shifts
In a dramatic reversal, gold and silver prices collapsed on Friday, erasing weeks of record-breaking gains. Gold fell sharply from Thursday's peak of $5,600 per ounce to $4,770, while silver experienced a staggering 31% drop—its largest single-day percentage decline since March 1980.
The sell-off marks a sudden end to the "gold fever" that had gripped global markets earlier in the week, as retail investors and funds alike rushed to buy bullion, coins, and exchange-traded funds. The reversal began in New York spot trading, where gold futures fell below the psychologically significant $5,000 threshold on Friday afternoon.
Policy and Perception: Unpacking the Drop
Market analysts attribute the plunge to two converging factors. First, reports that former President Donald Trump intends to nominate Kevin Warsh—a former Federal Reserve official known for his hawkish views—as the next Fed Chair have altered interest rate expectations. Warsh's potential appointment signals a possible shift toward tighter monetary policy, diminishing gold's appeal as a hedge against inflation and low rates.
Second, a perceived easing of immediate geopolitical tensions, particularly surrounding Venezuela and Iran, reduced the short-term demand for safe-haven assets. "We're seeing a classic 'buy the rumor, sell the news' scenario," said commodities analyst Maya Chen of Sterling Markets. "The fear premium that drove prices to unsustainable highs has rapidly deflated."
The downturn occurs against a complex backdrop. Gold prices had surged over the past year—from under $2,795 an ounce—amid global uncertainty, pandemic aftershocks, and trade turmoil. Professor Daniel McDowell of Syracuse University noted that such rallies often reflect a broader "psychological reaction" to perceived instability in the global order.
Investor Reactions: Voices from the Floor
Rajiv Mehta, Portfolio Manager: "This correction was overdue. The momentum was purely speculative. Fundamentals like real yields and dollar strength were being ignored. This brings valuations back to a more rational level."
Elena Rossi, Retail Investor: "I'm devastated. I bought gold coins last week for my family's future. They said it was 'safe.' Now I've lost thousands. It feels like the system is rigged against ordinary people trying to protect their savings."
David Park, Precious Metals Dealer: "The queues to sell are out the door today. Wednesday, they were lining up to buy. It's pure panic on the way down, just like it was greed on the way up. Volatility is the only constant."
Sarah Lin, Economic Historian: "History shows us these sharp corrections are inevitable after a parabolic rise. The longer-term trend, however, still hinges on dollar credibility and institutional independence. The Warsh nomination, if confirmed, could redefine that for years to come."
The nomination of Warsh, who would replace Jerome Powell in May, requires Senate confirmation. Observers suggest his stance could challenge the Fed's traditional independence, influencing both currency values and long-term confidence in traditional financial anchors.