A violent sell-off on Friday sent silver prices tumbling and pushed gold futures to their largest one-day dollar decline on record, capping a period of extreme volatility that has left precious metals trading more like meme stocks than traditional safe havens.
For months, a gravity-defying rally had driven gold and silver prices to successive all-time highs, drawing in speculative money and fuelling concerns that investors globally were losing confidence in fiat currencies such as the US dollar. That momentum abruptly reversed late Thursday, when the rally finally ran out of steam.
The downturn began around the time reports emerged that Donald Trump was preparing to nominate Kevin Warsh to succeed Jerome Powell as head of the Federal Reserve. Warsh is widely regarded as being more focused on controlling inflation than supporting economic growth, easing fears on Wall Street that the central bank would bow to political pressure to aggressively cut interest rates.
In recent months, concerns over the dollar’s long-term purchasing power in an environment of elevated inflation had driven investors into precious metals, powering what has come to be known on Wall Street as the “debasement trade.”
After Trump confirmed Warsh’s nomination on Friday morning, the US dollar recorded its strongest single-day performance in months. The sharp rebound triggered a rapid and broad-based unwind in precious-metals markets, with selling rippling from central bank holdings to physical vaults and trading desks across Wall Street, catching many investors off guard.
Warsh “is coming with hawkish credentials,” said Dec Mullarkey, managing director at SLC Management. “That lowers the risk of debasement across the currency. You’re returning to an orderly monetary approach.”
