Gold and silver prices collapsed on Friday in a dramatic reversal from their record-breaking rallies, after President Donald Trump nominated Kevin Warsh as the next chair of the U.S. Federal Reserve. Markets interpreted the pick as a sign of a firmer, more hawkish monetary policy stance and greater confidence in the Fed’s independence, triggering a sharp surge in the U.S. dollar and heavy selling across precious metals.
Silver led the sell-off, plunging roughly 30% in a single session after briefly touching new highs earlier in the week. Gold also tumbled more than 10% from its recent peak near the $5,000 level. The scale and speed of the decline shocked traders and marked one of the most violent pullbacks in precious metals in decades.
The initial drop followed headlines about Warsh’s nomination, but the sell-off intensified during U.S. trading hours as investors rushed to lock in profits after an extraordinary run-up throughout 2025. Both metals had attracted massive inflows as investors sought protection from dollar weakness, geopolitical tensions and fears that political pressure could undermine the Fed’s independence. As those narratives began to unwind, crowded positions quickly turned into a source of downside risk.
A stronger dollar was a key driver. As the greenback climbed, gold and silver became more expensive for non-U.S. buyers, dampening international demand. The dollar’s rebound also weakened the argument that precious metals would increasingly replace the U.S. currency as a global reserve asset.
Market strategists said forced selling amplified the move. Silver in particular had become a favorite among short-term traders using leverage. When prices dropped sharply, margin calls were triggered, accelerating liquidation and deepening losses. Analysts compared the speed of the reversal to historic episodes of extreme volatility in the metals market.
The Warsh nomination played a central psychological role. While some investors had expected a more dovish successor to Jerome Powell, Warsh was widely viewed as relatively hawkish, or at least less tolerant of prolonged easy policy. Analysts noted that even the perception of a shift toward tighter monetary discipline was enough to stabilize the dollar and reduce demand for inflation and debasement hedges like gold and silver. Still, some cautioned that Warsh is more of a pragmatist than an ideological hardliner, warning markets not to overreact.
Geopolitical risk had also helped fuel the earlier rally. Ongoing global tensions, U.S. foreign policy flashpoints, and uncertainty around trade and security issues had driven safe-haven flows into precious metals. As focus shifted toward Fed leadership and currency dynamics, those geopolitical tailwinds temporarily took a back seat.
The fallout spread beyond spot metals. Mining stocks fell sharply, and silver-focused exchange-traded funds suffered historic one-day losses as leveraged and momentum-driven strategies unwound. The sell-off highlighted how heavily positioned the market had become after months of nearly one-way gains.
Broader financial markets were also under pressure. U.S. equities declined as investors reassessed interest rate expectations and risk appetite in light of a potentially firmer Fed stance. The simultaneous drop in stocks and metals underscored a wider de-risking move rather than a simple rotation between asset classes.
Cryptocurrencies, however, were comparatively resilient. Bitcoin traded in the low-$80,000 range, holding above recent panic lows. Some digital asset traders argued that the commodities boom had previously siphoned risk capital away from crypto, and that a cooling in metals could eventually redirect flows back into the sector. Options market activity suggested renewed interest in upside exposure for bitcoin in the coming months.
Longer term, some analysts maintained that structural drivers for gold are not gone. Central bank diversification away from U.S. assets, especially among emerging markets and countries seeking to reduce reliance on the dollar, could continue to support demand over time. However, recent data suggested that central bank buying had slowed, removing an important pillar of support in the short term.
Overall, Friday’s plunge was widely seen as a violent but possibly transitional repricing. After an extended period in which powerful narratives pushed gold and silver to extreme highs, a shift in expectations around U.S. monetary leadership and the dollar triggered a rapid unwind. Whether the move marks the end of the metals bull run or just a brutal correction remains uncertain, but the episode underscored how quickly crowded trades can reverse when the macro story changes.
