Wash's nomination triggers "bloodbath" in gold and silver! Silver plunges over 35% intraday, gold drops over 10%.

U.S. President Trump’s nomination of Kevin Warsh as Chairman of the Federal Reserve has triggered the most brutal sell-off in precious metals in decades.

Gold and silver, which both set intraday all-time highs on Thursday, plunged dramatically. After news broke in the Asian session on Friday about Trump’s nomination of Warsh as Fed chair, gold immediately turned lower. During the European session, prices fell below the $5,000/oz mark, and losses deepened in U.S. trading, with spot gold’s intraday decline approaching 13%—the largest in over forty years since the early 1980s, exceeding the drop during the 2008 financial crisis.

Silver, which on Thursday broke through $120 for the first time in history, fell below $100 during Friday’s European session, and even dropped below $80 in U.S. trading. Spot silver once plunged by over 35% intraday, marking the biggest drop on record. This “bloodbath” spread through the entire metals market; London copper, which also hit records Thursday, retreated nearly 6%.

The market attributed the sharp decline to a dramatic shift in investor expectations for Fed policy. Warsh is known for his hawkish stance, and although he recently publicly supported rate cuts to align with Trump, the market still believes he is unlikely to pursue aggressive easing. Thu Lan Nguyen, an analyst at Commerzbank, stated: “The market views Warsh as more hawkish than candidates like Hassett.” This expectation pushed the dollar higher, reducing the attraction of dollar-priced commodities for global buyers.

Warsh’s nomination also eased concerns about the loss of Fed independence. Previously, investors rushed to precious metals for safe haven, partly out of worries about currency devaluation and the Fed’s independence. ING FX strategist Francesco Pesole noted that Warsh’s selection “is good news for the dollar and removes some concerns about more dovish candidates.”

The crash also exposed the extreme vulnerability of the precious metals market. After the recent meteoric rise in gold and silver prices, crowded long positions, record call option buying, and extreme leverage put the market in a state where a “gamma squeeze” could be triggered at any time. Pepperstone senior research strategist Michael Brown said, “The market was already in a bubble—just a small trigger could spark such a move.”

Gold and Silver Face Historic Crash

During the U.S. stock market’s Friday lunch session, the precious metals market saw a dramatic plunge. The New York main silver contract fell from Thursday’s record high of $121.785 to $75.44, a 34% drop. Spot silver fell below $74.60, a 35.5% daily drop—the largest intraday collapse on record. Silver repeatedly broke below and rebounded above the $100 psychological mark intraday, but ultimately could not hold it.

Gold was similarly devastated. NY gold futures fell from Thursday’s $5,586.2 record to $4,714.5, a nearly 12% drop. Spot gold hit $4,670.01, a decline of more than 12.7%. Both fell below the $5,000 mark.

At the close of gold futures trading, COMEX February gold futures dropped 11.37% to $4,713.9/oz, the biggest one-day drop since January 22, 1980. COMEX February silver futures plunged 31.35% to $78.29/oz, the biggest closing drop since March 27, 1980.

Other metals didn’t escape the carnage. London copper, which broke $14,520 and set records Thursday with an 11% gain, fell below $12,850 on Friday—down nearly 5.7%—and closed down about 3.4% at $13,158/ton. At the close, London tin fell about 5.7%, aluminum and nickel both dropped over 2%.

Fed Chair Nomination Triggers Expectation Reversal

The fuse for the market sell-off was news of Warsh’s nomination. Reports during Friday's Asian session said Trump would nominate Warsh; gold, which had set record highs nine sessions in a row, immediately turned lower. Before the U.S. open, Trump posted on his social media, officially announcing the nomination, claiming he had known Warsh for a long time and had no doubt he would become one of the greatest Fed chairmen, possibly the very best.

Warsh, known for his hawkish stance, changed his rhetoric last year, backing Trump’s calls for aggressive rate cuts—viewed as key to his nomination. Wall Street investors and strategists said Trump chose Warsh as a relatively hawkish pick to lead the Fed, expecting he may resist balance sheet expansion, supporting the dollar and steepening U.S. treasury yield curves.

Tom Price, an analyst at Panmure Liberum, said:

“The market thinks Kevin Warsh is rational and won’t push aggressive easing. Those ordinary investors with various goals—like capital preservation—are now taking profits.”

Warsh’s nomination propelled a sharp dollar rally; Friday marked its best single-day performance in half a year since July. The dollar index, which tracks the greenback against a basket of currencies, broke above 97.00 at Friday’s U.S. lunch session, up nearly 0.9% for the day. A stronger dollar makes dollar-priced commodities less attractive to global buyers, and undermines the theory that precious metals could replace the dollar as the world’s reserve currency.

Market Crowding Triggers a “Stampede”

Although Warsh’s nomination was the trigger, analysts generally agree that technical factors amplified the decline. Media reported that surging prices and volatility had put pressure on traders’ risk models and balance sheets. Goldman Sachs research noted record call option buying has “mechanically reinforced upward momentum” since option sellers hedge their exposure by buying more futures.

Gold’s decline may have been accelerated by a so-called “gamma squeeze.” This refers to options dealers needing to buy more futures as prices rise to stay balanced, but selling when prices drop. For the SPDR Gold ETF, many positions expiring Friday were concentrated at $465 and $455, while on Comex a large chunk of March and April options were centered at $5,300, $5,200, and $5,100.

Matt Maley, equity strategist at Miller Tabak, commented: “It’s insane. Much of this is probably ‘forced selling’. Silver has been the hottest asset for day traders and other short-term traders lately, so it accumulated leverage. With today’s sharp drop, margin calls were issued.”

Pepperstone’s Michael Brown observed, “The metals market has been in a bubble for some time, and earlier this week there were signs things were becoming completely unruly.” He said gold and silver positions were “clearly extremely crowded on the long side, and volatility has frankly hit ridiculous levels.” In such a high-volume, tightly leveraged long market, “it doesn’t take much to trigger” a move like Friday’s.

Brown said: “Simply put, everyone was rushing for the exit at the same time, pushing prices lower and in turn triggering further forced selling.” He reminded, “Momentum works both ways.”

Christopher Wong, strategist at Overseas-Chinese Banking Corp., said gold’s move “proves the warning that what rises fast drops fast.” While reports of Warsh’s nomination triggered the sell-off, he said a correction was overdue, “like one of those excuses the market’s been waiting for to close out those parabolic trades.”

Technical Indicators Gave Early Warnings

Prior to the crash, multiple technical indicators had sent warning signals. The Relative Strength Index (RSI) showed in recent weeks that gold and silver were likely overbought and due for a pullback. Gold’s RSI recently hit 90, its highest in decades.

Dominik Sperzel, trading head at Heraeus Precious Metals, said volatility was extreme, with the $5,000 and $100 psychological barriers broken multiple times Friday. "But we need to be prepared for more rollercoaster action."

Nevertheless, even after the sharp retracement, gold and silver posted solid gains for January. By front-month contract close, NY gold futures rose nearly 10% in January, silver over 10%.

COMEX February gold futures gained 8.98% in January, the largest monthly rise since September 2025, and rose for six straight months—the longest streak since October 2024. COMEX February silver futures jumped 11.63%, up nine consecutive months—the longest monthly streak ever, with a cumulative gain of 140.66% over nine months, the largest since April 2011.

Commerzbank analysts wrote in Friday’s report that the magnitude of the correction “shows market participants were just waiting for an opportunity to take profits after the rapid price surge.” Thu Lan Nguyen, head of commodities research, noted:

Though “the market views Warsh as more hawkish than other candidates like Hassett,” “we still believe that the Fed is very likely to relent to some extent, and rate cuts may exceed current market expectations.”

Mining Stocks Plunge in Tandem

The precious metals crash dragged down stocks of major mining companies. During Friday trading, U.S.-listed gold mining giants Newmont (NEM), Barrick Mining (B), and Agnico Eagle Mines (AEM) all fell more than 10%, while Coeur Mining (CDE) dropped nearly 19%.

Silver ETFs were hit even harder. ProShares Ultra Silver (AGQ) plunged over 60% intraday, iShares Silver Trust ETF (SLV) lost over 30%—both posting their worst single-day performances ever. Gold ETFs also came under pressure.

Although mining stocks slumped Friday, some analysts believe the correction is healthy for the market. Nate Miller, VP of product development at Amplify ETFs, said silver benefits from safe-haven and store-of-value demand, industrial demand, and global supply shortages. After such a rapid rise, a period of consolidation "is healthy and typical for commodity markets after sharp price appreciation."

Peter Grant, VP and senior metals strategist at Zaner Metals, said that although the rebound had gone too far too fast, it's not too late to buy metals now. He called a break below $100 an "opportunity," particularly near the 20-day moving average around $93. However, "you must be able to withstand volatility, which may persist at high levels."

Simon White, macro strategist at Bloomberg, noted:

“The silver/gold (price) ratio has surged nearly as much as it did in the late 1970s, and today’s dramatic moves may mark an inflection point. However, looking at gold and silver individually, their rallies have not yet fully matched those of 1979. Whether silver’s move relative to gold signals the end of the historic precious metals rally is too early to conclude. But right now, price is the main driver, and fundamentals will temporarily take a back seat.”

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