Gold and Silver Prices Crater as Kevin Warsh Fed Nomination Sparks Sharp Deleveraging

• Precious metals faced a massive liquidation on Friday, with gold dropping as much as 8% to break below the $5,000 threshold and silver falling below $100 per ounce.
• The correction followed reports and subsequent confirmation of Kevin Warsh as the next Federal Reserve Chairman, sparking a sharp rebound in the U.S. dollar index.
• Analysts at Goldman Sachs and other institutions noted that heavy concentration in call options exacerbated the downward move as the market reached extremely overbought levels.

Precious metals markets experienced a violent correction on Friday, marking the most severe single-day decline for gold and silver in over 13 years. The sell-off saw spot gold plunge from an all-time high of $5,595 reached on Thursday to an intraday low of $4,941, while silver plummeted more than 17% at its trough, crashing through the psychological $100 support level to touch $95.

The primary catalyst for the reversal was the strengthening of the U.S. dollar following President Trump’s announcement that he would nominate former Fed Governor Kevin Warsh to succeed Jerome Powell. Warsh, who is viewed by many market participants as a “hawkish” choice compared to other potential candidates, is expected to prioritize shrinking the Fed’s balance sheet and maintaining institutional credibility, which cooled recent bets on aggressive dollar debasement.

According to market strategists, the move was intensified by technical factors. Goldman Sachs analysts previously highlighted that the recent rally was mechanically reinforced by record buying of call options. As the price turned, the unwinding of these positions created a “delta-hedging” cascade, forcing further selling. Copper also fell more than 3% in London, reflecting a broader retreat from industrial and precious commodities that had reached overextended valuations throughout January.

“Gold pulled back toward the $5,000 level as investors reassessed positioning ahead of the official announcement,” said Konstantinos Chrysikos, Head of CRM at Kudotrade. “While the correction was sharp, the metal had gained more than 20% since the start of the month, making it a classic ‘sell the news’ event once the Fed leadership uncertainty was resolved.”

Despite the volatility, some analysts maintain a bullish long-term outlook. While the immediate “fear premium” related to Fed independence and government shutdown risks has subsided, structural demand from central banks in emerging markets remains a pillar of support. However, the breach of key technical levels at $5,000 for gold and $100 for silver suggests that the market may enter a period of consolidation as traders wait for Warsh’s confirmation hearings and further signals on the 2026 interest rate path.

Disclaimer: This article is for informational purposes only and does not constitute advice of any kind. Readers should conduct their own research before making any decisions.