Gold's epic 12% plunge wasn't driven by economic data! It was actually Kevin Warsh, Trump's handpicked candidate for Fed Chair. Coupled with crowded trading and a monthly overbought condition, his nomination became the core trigger for the gold and silver price crash. The key to all this was the market's anticipation of a sharp drop in financial market uncertainty and a short-term recovery in the dollar's credibility after his appointment.
Warsh's background overturns the traditional pattern of previous Fed chairs. Greenspan and Bernanke were academics with PhDs in economics, Powell was a "special case" with a pure legal background, while Warsh is a perfect combination of both—a Stanford Bachelor of Public Policy and a Harvard Law School Juris Doctor. Despite not having an economics background, he possesses a solid knowledge base and understands the operating logic and market rules of Wall Street.
This market-oriented heavyweight's policy leanings were already evident in his sharp criticisms of the Federal Reserve: he bluntly stated that monetary policy was "fast-food" and focused on short-term gains rather than long-term goals; he accused the Fed of overstepping its bounds in non-core areas like climate change; he criticized the excessive power of institutions; and he attacked the use of "independence" as a shield to evade responsibility. His direct and unambiguous style contrasts sharply with Greenspan's ambiguous pronouncements, and this sharpness has given the market clear expectations regarding his policy direction.
Unlike the short-term impact of economic data, Warsh's nomination has reshaped the logic of the precious metals market. His appointment and the resulting certainty have led to safe-haven funds withdrawing from gold, pushing up the dollar in the short term. This also makes it clear to the market that in today's global financial markets, the impact of personnel changes far surpasses that of conventional data.
Do you think Warsh can deliver on his promise to reduce the Fed's power after taking office? Will gold continue to decline due to the dollar's recovery, or will it rebound due to geopolitical factors?
