Donald Trump’s announcement that he has nominated Kevin Warsh to become the next Chair of the Federal Reserve (when Jerome Powell’s term ends in May) quickly turned into a major sentiment shift across global markets.

Instead of stoking fears of a “politicized” Fed, many investors viewed Warsh as a relatively safe, experienced choice someone likely to preserve the central bank’s independence. As a result, the “safe-haven” positions that had been built up especially in gold and silver were unwound aggressively.

Why did gold and silver fall so hard?

In the weeks leading up to the nomination, gold and silver had surged as investors hedged against policy uncertainty at the Fed and the risk of a more extreme policy path. Once Warsh’s name was confirmed, a portion of that “risk premium” was pulled out almost instantly.

In the sharpest reaction session:

• Gold: after hitting a record high near $5,594.82/oz, prices dropped roughly 9.5% at one point to around $4,883.62/oz, putting it on track for the biggest one-day fall since 1983 (based on the timing and figures reported by Reuters).

• Silver: also collapsed, briefly sliding to around $77.72/oz. Reuters recorded a drop of about 27.7% on the day one of the worst sessions in decades while some market trackers cited losses closer to 31%.

Analysts described the move as a combination of profit-taking and a “reset” in expectations: the U.S. dollar strengthened, real-yield expectations shifted, and once the market began flipping positions, technical selling and forced liquidations likely amplified the volatility.

By the start of the new week, the pressure hadn’t fully faded: Reuters noted gold remained under strain as the dollar stayed firm, while silver saw a technical bounce but remained highly volatile.

Who is Warsh and what is the market betting on?

Warsh previously served as a Fed Governor from 2006 to 2011, taking part in policy decisions through the 2008–2009 global financial crisis. That track record is a key reason markets consider him credible.

But what investors care about most is his policy direction:

• Warsh is often seen as someone who could support lower rates, but not necessarily “easing at any cost.”

• He has also emphasized shrinking the Fed’s footprint especially through balance-sheet reduction a stance that could influence liquidity conditions and risk-asset valuations.

This mix “not overly dovish,” potentially open to easing, and expected to respect the Fed’s independence helped markets interpret him as a stabilizing pick compared with more extreme scenarios.

Spillover impact: a stronger dollar, shaky equities and crypto

Following the nomination, the U.S. dollar rallied (Reuters noted a strong move in the Dollar Index), reflecting a rapid repricing of policy expectations and political risk.

Meanwhile:

• U.S. equities closed lower: Nasdaq led the declines, pressured by weakness in major tech names; precious-metals-linked stocks also sank alongside gold and silver.

• Bitcoin and other crypto assets fell sharply; Reuters reported bitcoin briefly touched its lowest level since late November.

Not everyone is fully convinced the story is settled. Some observers continue to question how much political pressure the Fed could face especially given Trump’s repeated preference for lower rates.

Looking ahead: Asia faces a packed week of catalysts

Even as the Fed story remains front and center, Asia is heading into a week loaded with market-moving variables:

• India’s budget: the government highlighted infrastructure and fiscal priorities, with deficit and debt-to-GDP expectations closely watched.

• Japan’s election (Sunday): results could shape expectations around fiscal policy and the bond market.

• Thailand’s vote: alongside constitutional-related developments, it adds another layer of regional political sensitivity.

What markets will watch next

From here, the narrative may shift from the “name” to the policy path:

1. The confirmation process and hearings in the U.S. Senate

2. Warsh’s signals on the Fed balance sheet and how he views the room for easing in 2026

3. U.S. inflation and labor-market data still the key drivers of any Fed rate decisions

For gold and silver, the recent collapse is effectively a stress test of the trend. If underlying forces structural hedging demand, geopolitical uncertainty, and reserve diversification remain strong, prices may stabilize at new levels. But near-term volatility is likely to stay elevated.

Source: Reuters