11:46 pm - February 4, 2026
Gold and silver prices experienced their worst single-day losses in decades on Friday, ending a year-long rally that had pushed both precious metals to record highs. The dramatic sell-off came as markets reacted to President Donald Trump’s nomination of Kevin Warsh to lead the Federal Reserve, triggering a massive repricing of monetary policy expectations and dealing a severe blow to the debasement trade that had fueled the metals’ surge.
Gold plunged 12 percent to trade around $4,786 an ounce, marking its steepest decline in more than ten years, according to market data. Silver suffered an even more brutal reversal, plummeting as much as 32 percent to approximately $80 an ounce in its worst single-day loss since 1980. Both metals remain significantly higher over the past twelve months, with gold still up roughly 65 percent year-over-year despite Friday’s decline.
Kevin Warsh Nomination Triggers Market Reversal
The sell-off followed Trump’s announcement that Kevin Warsh, a former Federal Reserve Governor, would replace Jerome Powell as Fed Chair if confirmed by the Senate. Warsh is widely considered more hawkish than other candidates Trump had been considering and is expected to preserve the central bank’s independence, according to market analysts.
Art Hogan, chief market strategist at B. Riley Wealth Management, told Business Insider that investors were eager to take profits after the parabolic move in precious metals over the past year. “You knew there was going to be some trigger that would cause a bit of a technical pullback,” he said.
Debasement Trade Unwinds as Dollar Surges
The nomination appeared to reverse the so-called debasement trade that had boosted gold and silver while weakening the US dollar over recent months. The US Dollar Index, which had declined 11 percent over the past year, spiked nearly 1 percent by Friday afternoon following the announcement.
Additionally, the dollar’s surge appeared to jump-start the sell-off in metals, according to Hogan. Investors had been buying hard assets like gold and silver out of concern that aggressive rate cuts and political interference at the Fed would devalue the dollar and fuel higher inflation.
However, Warsh’s more orthodox approach to monetary policy has eased some of those concerns. David Rosenberg, founder of Rosenberg Research, wrote in a note to clients that the market reaction pointed to less dovish expectations with independence fears easing at the margin.
Confusion Over Future Monetary Policy
José Torres, a senior economist at Interactive Brokers, described the sell-off in metals as a knee-jerk reaction to Trump’s Fed Chair pick. He noted confusion in markets about what kind of monetary policy Warsh would ultimately pursue, given Trump’s stated preference for lower interest rates.
“What President Trump wants is a dove. However, Warsh historically is an inflation hawk,” Torres told Business Insider. Meanwhile, much of the recent gains in precious metals had been fueled by speculation and hype, making a pullback more likely regardless of the trigger, he added.
In contrast to the metals market carnage, US stocks also pulled back on the news. The tech-heavy Nasdaq Composite dropped more than 1 percent, while the S&P 500 retreated further from the 7,000 threshold it had surpassed for the first time earlier in the week.
Analysts Weigh Long-Term Outlook
Hogan said it remained too early to determine whether the debasement trade was truly unwinding, though Friday’s reaction suggested some investors were moving in that direction. He speculated that precious metals could face additional downward pressure in the near term given the abrupt reversal in market sentiment.
Warsh’s nomination now heads to the Senate for confirmation hearings, where lawmakers will have the opportunity to question him about his views on monetary policy and Federal Reserve independence. The timeline for confirmation remains uncertain, though markets will likely continue to react to any signals about his approach to interest rates and central bank governance.
