Epic crash, the reason has been found! (1)
Wind data shows that by the close, spot gold fell by 9.25%, reported at $4880.034 per ounce, at one point during the session it dropped by 12.92%, breaking below $4700 per ounce, and reached a low of $4682 per ounce. Spot silver prices also saw a dramatic drop of 35.89% during the session, closing down 26.42%, reported at $85.259 per ounce.
In terms of news, Xinhua reported from New York on January 30 that U.S. President Trump announced on social media on the 30th the nomination of former Federal Reserve Board member Kevin Walsh as the next Federal Reserve Chairman. This nomination still requires approval from the Senate.
Analysts believe that Walsh's nomination is extremely damaging to gold and silver not because the market suddenly believes the Federal Reserve will shift to aggressive rate hikes, but because Walsh is seen as someone who can 're-anchor the credibility of the Federal Reserve.'
This change directly challenges the prevailing narrative of the past few weeks of 'central bank independence weakening - currency depreciation - physical assets always rising' and has become a trigger for gold and silver bulls to take profits.
Thu Lan Nguyen, an analyst at Commerzbank, stated: 'The market believes Walsh is more hawkish than other candidates like Haskett.' This expectation has driven the dollar to rebound, reducing the attractiveness of dollar-denominated commodities to global buyers.
Krishna Guha, vice chairman of Evercore ISI, stated that the market is trading according to 'hawkish Walsh' and that 'Walsh's nomination helps stabilize the dollar and reduces the one-sided risk of a continued dollar decline, thus challenging the logic of 'currency depreciation trades' - which is also the reason for the significant drop in gold and silver.'
Walsh's nomination has also alleviated market concerns about the loss of Federal Reserve independence. Previously, investors flocked to precious metals for safety, partly due to concerns about currency depreciation and the independence of the Federal Reserve. ING foreign exchange strategist Francesco Pesole stated that Walsh's selection is 'good news for the dollar and can alleviate some concerns about more dovish candidates.'