Precious Metals Take Hit Amid Fed Chair Nominations
- Jack Borys
- 2 days ago
- 2 min read
The steady climbs of both Gold and Silver were brought to a halt this past Friday, catching investors off guard. A major sell off of both the precious metals brings the commodities back to Earth after months of high gains. Before Friday, silver had been experiencing tremendous gains (roughly 78%-144% YoY) that had not been seen in decades. Gold, following closely behind, was rapidly surging (50%-65%). The rises in these commodities were results of geopolitical and monetary policy concerns.
Investors have been dumping money into Gold and Silver as an alternative asset to protect their portfolios. Emerging markets have also been buying these metals as a way to hedge against the U.S. dollar, as currency remains a top priority in global financial markets. Gold was able to reach highs of around $5,600/ounce and Silver above $120/ounce as of late January for these reasons.
The quick volatility comes amid the announcement that Donald Trump nominates Kevin Warsh, former member of the Federal Reserve Board of Governors from 2006 to 2011, to be the new chairman of the Fed. Commodity prices fall as investors grow worried about Warsh’s beliefs on inflation and interest rates. Warsh historically has been more concerned with higher inflation than slower growth, and investors are assuming that this mindset will align with Trump’s focus on lowering interest rates. These potential lower rates reduce the opportunity cost of holding commodities, especially since they do not pay yield like bonds or savings. Silver on Friday dropped a whopping 31%, its steepest drop since 1980. Gold simultaneously dropped over 10%, also its steepest drop since 1980.
Analysts believe that this sell off was needed for the precious metals, and a correction was coming at some point. The momentum behind Gold and Silver was enticing, but it was never going to be sustainable. Matthew Piggott, Director of Gold and Silver at Metals Focus, described January’s rally in the metals as irrational exuberance and said that, while extreme, he sees the current selloff as a healthy correction. In the short-term, this volatility leaves investors with uncertainty, but long-term buyers are still forecasting large gains from both Gold and Silver. Due to the heavy reliance on interest rates and inflation, a single policy change can swing the beliefs behind these metals and bring them back to steady upward trends.
Ultimately, the recent sell-off in gold and silver serves as a reminder that even the strongest rallies are not immune to sharp corrections when sentiment shifts. While months of geopolitical uncertainty, central bank demand, and inflation concerns fueled record-setting gains, the rapid reversal highlights how sensitive precious metals remain to changes in monetary policy and investor expectations. The market’s reaction to new Federal Reserve leadership signals that confidence can turn quickly, especially after prolonged periods of “irrational exuberance.” Still, many analysts view the pullback not as the end of the metals’ broader uptrend, but as a necessary reset that could lay the groundwork for more sustainable growth. For investors, the episode underscores an important lesson: gold and silver may offer protection in uncertain times, but they are far from risk-free and require careful attention to the macroeconomic forces that drive their value.
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