Markets Jolt as Trump’s Fed Pick Triggers Sharp Reversal in Gold and Silver

By Staff, Agencies

The powerful rally in precious metals that dominated the past year showed signs of cracking on Friday after markets reacted to Donald Trump’s choice for the next Federal Reserve chair.

Gold and silver, both of which had surged to repeated record highs over the last 12 months, suffered steep selloffs as investors reassessed the outlook for US monetary policy.

Gold, still up roughly 65% over the past year, fell about 12% in a single session to around $4,786 an ounce—its worst one-day drop in more than a decade. Silver, which had outperformed gold during the rally, plunged as much as 32% to near $80 an ounce, marking its sharpest decline since 1980.

The selloff followed news that Kevin Warsh, a former Federal Reserve governor, is Trump’s nominee to replace current Fed Chair Jerome Powell later this year, pending Senate confirmation. Markets had been bracing for a more aggressively dovish pick who might push interest rates lower, weaken the US dollar, and fuel the so-called “debasement trade” that has supported gold and silver prices.

Instead, Warsh is widely viewed as more hawkish and supportive of the Fed’s independence. That perception prompted investors to dial back expectations of loose monetary policy and political influence over the central bank—key factors that had driven demand for hard assets.

US equities also pulled back following the announcement. The Nasdaq Composite fell more than 1%, while the S&P 500 retreated from the 7,000 level it had crossed earlier in the week for the first time.

Economists said the market reaction reflected a shift toward more orthodox monetary policy expectations. David Rosenberg of Rosenberg Research noted that fears of currency debasement and a politicized Fed appeared to be easing at the margin, leading some investors to unwind positions in gold and silver.

While it remains unclear whether the debasement trade is fully reversing, analysts cautioned that further downside in precious metals is possible as markets continue to adjust to the implications of Warsh’s nomination.