Warsh Pick Sends Gold and Silver into a Tailspin

CNBC, the Financial Times, Bloomberg, BBC, and Business Insider contributed to this report.

Markets got the clarity they wanted – and the chaos someone expected. President Trump’s choice of Kevin Warsh to run the Federal Reserve steadied Wall Street nerves but sparked a brutal unwind in commodities, with gold and silver taking the worst of it.

Warsh isn’t a newcomer: he sat on the Fed from 2006 to 2011, playing a central role during the global financial crisis – and he left the job as more of a critic than a cheerleader for central-bank orthodoxy. That resume helped calm investors who’d been fretting about Fed independence.

The immediate market reaction was textbook: the dollar firmed and safe-haven bets were sold. Spot gold and silver, which had just run to nosebleed levels, crashed – plunging double-digit percentages in ugly fashion and wiping out much of the recent rally. Traders pointed to a mix of profit-taking, a stronger dollar and a reassessment of how hawkish a Warsh-led Fed might be.

Asia felt the pain. South Korea’s benchmark plunged hard enough to trigger a temporary trading pause as futures tumbled, while other regional indices also slumped on the news. Those moves amplified the global sell-off.

It wasn’t all about the Fed. US politics crept in: House Speaker Mike Johnson said he’s “confident” the partial government shutdown will be over by Tuesday, a line that reassured some investors about near-term policy continuity in Washington.

Across the Pacific, China’s factories showed a bit of life – the private-sector PMI rose to 50.3 in January, the strongest reading since October, offering a modest counterweight to the gloom in commodities and equities.

And for traders hunting catalysts this week: the earnings calendar has a couple of big names ready to try and lift the mood. Alphabet is due after the bell on Wednesday and Amazon reports after the close on Thursday – tech earnings that could either soothe or stoke the market’s skittishness.

Warsh’s nomination gave markets a clearer path for Fed policy – which calmed one corner (equity volatility that fears a politicized Fed) and crushed another (the debasement/safe-haven trade that powered gold and silver). Expect volatility to stick around as traders price in how hawkish the new Fed chair will actually be, and as earnings and Washington headlines roll through.