Gold and silver prices suffered a historic sell-off on Friday after U.S. President Donald Trump officially nominated Kevin Warsh as the next Chair of the Federal Reserve, a move that markets interpreted as reducing uncertainty around central bank leadership and strengthening the U.S. dollar.
The sharp repricing marked one of the most violent corrections in precious metals in decades, ending a powerful multi-month rally fueled by geopolitical stress, currency concerns, and aggressive speculative positioning.
Silver Sees Historic Collapse
Spot silver plunged nearly 28% to $83.45 per ounce, hovering near intraday lows. Meanwhile, silver futures collapsed 31.4%, settling at $78.53, marking the largest single-day decline since March 1980.
The magnitude of the move shocked traders and underscored how crowded the silver trade had become following its explosive rally in 2025.
Gold Retreats From Record Highs
Gold also came under intense pressure. Spot gold fell roughly 9% to $4,895.22 per ounce, while gold futures slid 11.4% to close at $4,745.10.
The decline followed gold’s surge toward the psychologically significant $5,000 level, which many market participants had viewed as increasingly vulnerable to profit-taking.
Stronger Dollar Accelerates Selling Pressure
The initial wave of selling began shortly after news of Warsh’s nomination broke, then intensified during U.S. afternoon trading as investors rushed to lock in gains after months of heavy inflows into precious metals.
A key driver of the sell-off was a sharp rebound in the U.S. dollar, with the U.S. Dollar Index (DXY) rising as much as 0.8% at its peak. A stronger dollar makes gold and silver more expensive for international buyers and weakens the narrative of precious metals as an alternative global reserve asset.
Forced Liquidations and Leverage Unwind
According to Matt Maley, equity strategist at Miller Tabak, much of the decline likely stemmed from forced selling and margin calls.
Silver, in particular, had become a favorite among short-term traders, leading to elevated leverage across futures and derivatives markets. As prices broke sharply lower, margin requirements were triggered, accelerating liquidation and deepening losses.
Markets Reprice Fed Expectations
Before the announcement, National Economic Council Director Kevin Hassett had been widely viewed as a leading candidate to replace Jerome Powell. However, Warsh had surged ahead in prediction markets in recent days, and his official nomination quickly reshaped expectations.
Krishna Guha, Vice Chairman at Evercore ISI, noted that markets are increasingly pricing in a more “hawkish” Fed trajectory under Warsh. This perception has helped stabilize the U.S. dollar and reduce fears of prolonged currency debasement — a major tailwind for gold and silver in recent years.
That said, Guha cautioned against overreacting, emphasizing that Warsh is widely regarded as a pragmatic policymaker rather than an ideologically rigid hawk.
The Perfect Storm Behind the 2025 Rally
According to Claudio Wewel, FX strategist at J. Safra Sarasin, the explosive rise in precious metals during 2025 was driven by a “perfect storm” of geopolitical tensions, global uncertainty, and speculation around future U.S. monetary policy leadership.
Markets had previously priced in the possibility of a more dovish Fed successor, which further boosted gold and silver. Warsh’s nomination forced a rapid reassessment of that scenario.
Mining Stocks and ETFs Hit Hard
Following gold’s 66% gain and silver’s staggering 135% surge in 2025, the correction spilled over into mining equities and exchange-traded funds:
Coeur Mining shares dropped 17%
ProShares Ultra Silver ETF fell more than 62% intraday
iShares Silver Trust (SLV) declined 31%, on track for its worst session on record
Portfolio Crowding Comes Into Focus
Katy Stoves, investment manager at Mattioli Woods, compared the gold trade to extreme concentration seen in technology and AI stocks.
“When too many investors are positioned on the same side, even fundamentally strong assets can experience sharp sell-offs once sentiment shifts,” she said.
Was Gold’s Rally Too Easy?
Toni Meadows, Head of Investment at BRI Wealth Management, argued that gold’s rapid ascent toward $5,000 had become “too easy.”
With the U.S. dollar stabilizing, near-term momentum has weakened, although he emphasized that central bank reserve diversification remains a longer-term structural support, especially as global concerns over U.S. trade and foreign policy persist.
Broader Market Reaction
The sell-off extended beyond commodities:
Nasdaq fell 1.25%
S&P 500 declined 0.9%
Meanwhile, the crypto market remained relatively stable. Bitcoin traded around $84,000, recovering from weekly lows near $81,000.
Could Crypto Be Next to Catch Up?
Paul Howard, director at trading firm Wincent, noted that the strong rally in commodities had previously drawn capital away from digital assets. However, the sharp correction in precious metals may signal a reversal of that flow.
He pointed to rising demand for February Bitcoin call options, particularly at the $105,000 strike, suggesting traders are positioning for crypto to potentially “catch up” after lagging behind commodities.
Final Takeaway
While the nomination of Kevin Warsh was broadly viewed as a stabilizing signal for U.S. monetary policy, the market reaction highlighted how fragile sentiment had become after months of one-sided positioning. The sell-off appears to reflect a knee-jerk repricing of expectations, rather than a fundamental collapse in long-term demand.
Disclaimer:
This article is for informational purposes only and reflects personal analysis. It does not constitute financial or investment advice. Financial markets are volatile, and readers should conduct their own research before making any investment decisions. The author bears no responsibility for any losses incurred.
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