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Trump’s Fed pick sparks brutal gold and silver sell-off
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Gold and silver prices extended last week’s dramatic sell-off on Monday, as investors continued to digest the implications of President Donald Trump’s announcement of Kevin Warsh as the next chair of the US Federal Reserve.
The move has fuelled expectations of a more government pressure on the Fed and prompted a sharp reassessment of positions across precious metals.
Spot gold fell as much as 10% in early trading, while silver plunged up to 16%, following Friday’s rout that marked the largest intraday decline on record for the white metal.
The scale and speed of the move underscored how vulnerable the market had become after months of aggressive buying driven by geopolitical tension and bets on looser US monetary policy.
“The sharp selloff on Friday followed news that US President Donald Trump intends to nominate Kevin Warsh as the next Federal Reserve chair – a development that boosted the US dollar and reinforced expectations of a more hawkish policy stance,” said Ewa Manthey, commodities strategist at ING, and Warren Patterson, head of commodities strategy.
“While a correction was overdue after the intense rally, the scale of Friday’s decline far exceeded most expectations.”
Why the Fed matters for gold
Gold and silver are particularly sensitive to US interest-rate expectations.
Higher rates increase the opportunity cost of holding non-yielding assets such as precious metals, while a stronger dollar makes them more expensive for overseas buyers.
Warsh, a former Fed governor, has voice sentiments supportive of Trump’s vision for the Fed, including regular rate cuts.
That reassessment has been swift. Investor caution has been evident in exchange-traded funds, with silver holdings falling for a seventh consecutive session to their lowest level since November 2025.
Futures data also show speculators cutting back sharply on bullish bets, signalling a broader retreat from the sector.
“CFTC positioning shows a cooling in speculative interest across precious metals,” the ING report continued.
“Managed money net longs in COMEX gold fell by 17,741 lots last week… Speculators also cut net longs in silver… taking positioning to its lowest since February 2024.”
Margins rise, volatility bites
Market stress has been amplified by mechanical factors.
CME Group is set to raise margin requirements on COMEX gold and silver futures after last week’s historic swings, forcing traders to post more collateral or reduce exposure.
Such moves tend to accelerate sell-offs, particularly in heavily leveraged markets.
Attention is now turning to Asia, where Chinese investors have historically provided support during price dips. However, with volatility elevated and the Lunar New Year approaching, participation may be more cautious than usual.
“With volatility spiking and the Lunar New Year approaching, traders are likely to pare back positions and reduce risk,” the ING analysts said.
“Price direction in the near term will hinge on the extent of dip-buying from Chinese investors following Friday’s retreat.”
Outlook remains fragile
For now, the precious metals market remains at the mercy of macro forces, with little clarity on how quickly sentiment will stabilise.
Investors are watching US data closely for clues on real interest rates and the dollar’s next move, both of which will be shaped by expectations around the Fed’s future direction.
“Overall, volatility across precious metals is likely to remain elevated in the near term,” Manthey and Patterson said.
“For gold and silver, macro uncertainty, real rate expectations, and USD direction will continue to dominate sentiment,” the report concluded.
Gold tops $5,500, silver rises while Powell downplays metal rally
Federal Reserve Chair Jerome Powell pushed back against political pressure on the US central bank on Wednesday and defended its independence, urging the next chair to “stay out of elected politics”. Markets, however, appeared unconvinced, accelerating a sell-off in the dollar as gold and silver hit fresh record highs.
“Don’t get pulled into elected politics. Don’t do it,” Powell told reporters.
The reaction followed the Federal Reserve’s latest decision to leave interest rates unchanged in a range between 3.5% and 3.75%.
Asked whether the Fed was drawing any macroeconomic signal from the explosive rally in precious metals, Powell played down its significance.
“We don’t take much message macroeconomically,” Powell said. “The argument that we are losing credibility is simply not the case. If you look at where inflation expectations are, our credibility is right where it needs to be.”
He highlighted that the Fed does not “get spun up over particular asset price changes”, although it continues to monitor markets closely.
Markets react
The market reaction sharply contradicted Powell’s message.
Gold jumped to $5,500 per ounce, setting a new all-time high, while silver climbed above $117 per ounce.
Gold is now up over 20% this month, on track for its strongest monthly performance since January 1980.
Silver’s gains have been even more dramatic, with prices already up around 55% this month — the strongest monthly rise on record.
Meanwhile, the US dollar index, which tracks the greenback against a basket of major currencies, fell to levels last seen four years ago.
“The next couple of days will show whether investors have concluded that the dollar needs to go lower and that today’s bounce is a selling opportunity,” said James Knightley, chief economist at ING.
The dollar is now more than 10% below its 2025 highs, weighed down by persistent macro headwinds, including global central bank diversification away from US assets, widening fiscal deficits, recurring questions over Fed independence, and expectations of further policy easing.
‘Is gold the new bitcoin?’
Veteran Wall Street economist Ed Yardeni linked the rally to politics, suggesting its sustained popularity could make “gold the new bitcoin”.
Yardeni argued that US President Donald Trump, a vocal supporter of cryptocurrencies, appears to be inadvertently fuelling the rise in gold prices.
On Tuesday, Trump said “the dollar is doing great” when asked whether the currency had fallen too much, signalling he is comfortable with a weaker greenback.
“A weaker dollar may put upward pressure on US inflation, which would also boost the price of gold,” Yardeni said.
Commodities surge beyond gold and silver
The rally has spread across the broader commodities market.
Platinum climbed above $2,900 per ounce for the first time on record this week and is already up 33% this month. Palladium, which benefits from stronger industrial demand, rose to a four-year high and is up more than 22% year to date.
Copper also surged, hitting a record $6.30 per pound on Thursday.
Across commodity markets, investors are increasingly positioning for prolonged dollar weakness, amid perceptions that US institutions are willing to tolerate — or quietly accept — the shift.
Euro stronger, equities mixed
In Europe, the euro traded near $1.1950, edging lower after briefly breaking above $1.20 earlier in the week following Trump’s comments.
The single currency has now risen for three consecutive months against the dollar and is up around 15% year on year.
European equities were mixed. France’s CAC 40 and Italy’s FTSE MIB gained around 0.5%, while Germany’s DAX fell over 1%.
Frankfurt’s losses were led by SAP, which slid 16% — its biggest one-day drop since October 2020 — after weaker-than-expected cloud sales and a cut to 2026 revenue guidance outweighed in-line fourth-quarter results.