Precious metals markets experienced a historic and violent reversal on Friday, with gold and silver posting their largest single-day losses in decades. The selloff was triggered by news that US President Donald Trump intends to nominate former Federal Reserve Governor Kevin Warsh as the next Fed Chair, a move interpreted as hawkish and likely to prolong restrictive monetary policy.
Gold (XAU/USD) plunged more than 12% in a single session, briefly dropping below $4,700 and marking its steepest one-day decline in nearly 40 years. The spot price crashed through the psychologically critical $5,000 level, settling into a corrective phase. Silver faced an even more dramatic collapse, plummeting a staggering 26% in what analysts described as an unprecedented single-day decline.
The catalyst was a fundamental reassessment of the monetary policy outlook. Kevin Warsh is widely viewed as a policy hawk, reviving market concerns that interest rates may remain elevated for longer than previously anticipated. This news, coupled with hotter-than-expected US Producer Price Index (PPI) data showing headline inflation at 3% year-over-year, strengthened the US dollar and pressured dollar-denominated assets like gold.
The selloff was amplified by a market structure that had become excessively speculative. Analysts noted that the recent parabolic rally in metals, which saw gold reach a peak of $5,595 per ounce and silver surpass $121, had transformed into a momentum-driven trade detached from fundamentals. Heavy speculative buying from China, combined with trend-following algorithmic trading programs, had driven prices to unsustainable levels. Jay Hatfield, CIO at Infrastructure Capital Advisors, stated, "We had identified about three or four weeks ago that it turned into a momentum trade, not a fundamental trade. We were just riding it, waiting for this type of thing to happen."
The reversal signs emerged late Thursday as the dollar strengthened, with gold shedding over $200 per ounce in approximately ten minutes. The confirmation of Trump's Fed nomination on Friday prompted massive profit-taking, particularly from Chinese investors, sealing the market's fate. The iShares Silver Trust (SLV) saw over $40 billion in volume on Friday, positioning it among the world's most actively traded securities, compared to its typical sub-$2 billion daily volume.
Technically, the focus for gold has shifted to key support levels between $4,780 and $4,604. A sustained break below this zone could expose deeper downside toward $4,450. Analysts are now assessing whether this represents a temporary correction within a larger bullish structure or the beginning of a more extended consolidation phase, with the near-term outlook dependent on incoming US economic data and Federal Reserve communication.
