Gold And Silver Prices Plunge After Fed Nomination

Gold and silver markets have been on a wild ride, with prices swinging dramatically in recent days and sending shockwaves through global financial markets. After a period of record highs in January 2026, both precious metals suffered one of their steepest falls in decades, triggered by a combination of political developments, regulatory changes, and shifting investor sentiment.

According to BBC, spot gold prices plunged nearly 10% at one point on February 2, 2026, while silver slumped by as much as 15% before both metals managed to claw back some losses. The rout followed Friday’s historic sell-off, where gold recorded its sharpest one-day drop since 1983—over 9%—and silver collapsed by a staggering 27%. Reuters reported that gold tumbled 9.8% on Friday, shedding about $900 from its January 29 record high of $5,594.82, while silver has now dropped roughly 32% since hitting a record high of $121.64 just last week.

The primary catalyst for this sudden reversal was the nomination of Kevin Warsh as the next chair of the US Federal Reserve by President Donald Trump. Financial markets responded instantly to the news, with the US dollar jumping 1% and precious metals investors scrambling to adjust their positions. As Deutsche Bank analysts put it, “The clear catalyst for Friday's sell-off appeared to be news... that Kevin Warsh had secured the nomination for Fed chair.”

But that wasn’t the only factor at play. CME Group, a major exchange for precious metals, announced an increase in margin requirements on futures contracts, making it more expensive for speculators to hold leveraged positions. As reported by Reuters, these changes took effect after Monday’s market close and contributed to the forced liquidation of positions, further amplifying the sell-off. John Meyer, an analyst at SP Angel, likened the situation to a rollercoaster ride: “Gold and silver are on a rollercoaster ride and when you get to the top of the 'lift hill', gravity takes over and you are heading down.”

Despite the sharp falls, gold prices remain about 70% higher than they were at the same point last year, according to the World Gold Council. In fact, the recent volatility comes after an extended rally that began when central banks started buying more bullion, and geopolitical tensions—including US tariffs—drove investors toward so-called safe haven assets. As Mark Matthews of Bank Julius Baer told Reuters, one likely explanation for the sharp falls is that “precious metals prices collapsed simply because they had already gone parabolic in the previous week. Once profit taking started, it just snowballed.”

The global impact of the metals rout was immediate and far-reaching. Asian stock markets were particularly hard hit, with South Korea’s benchmark Kospi index leading losses by falling 5%, as reported by Yonhap News Agency. The Hang Seng in Hong Kong dropped 2%, and Japan’s Nikkei 225 was down more than 1%. The UK’s FTSE 100 index initially fell but then managed to recover, ending the day up 1%. US stock markets also dipped at first, but the S&P 500 index eked out a modest gain of 0.1% by the close, according to BBC.

The ripple effects extended beyond equities. The Korean won plunged against the US dollar, and bond yields rose as investors sought safety. Even the local gold market in South Korea wasn’t spared, with gold traded on the Korea Exchange falling to its lowest permissible limit of 10%—the first time since the market opened in 2014, according to the exchange operator.

Oil markets also joined the sell-off, with crude prices falling nearly 5%. This was attributed to several factors, including an agreement among major oil producers to keep output unchanged and signs of de-escalating tensions between the US and Iran. President Trump signaled that the US and Iran were "seriously talking," which contributed to a sense of easing geopolitical risk. Brent crude futures fell 4.9% to $65.93 per barrel, while US West Texas Intermediate futures dropped 5.4% to $61.66, according to CNBC and Reuters.

Amid the turmoil, analysts have been quick to caution against interpreting the recent plunge in precious metals as the start of a prolonged downturn. Michael Hsueh, a precious metals analyst at Deutsche Bank, noted, “The conditions do not appear primed for a sustained reversal in gold prices,” emphasizing that investor demand for upside remains strong and that continued volatility is more likely than a collapse in sentiment.

On CNBC’s “Squawk Box Europe,” Grace Peters, global investment strategist at JPMorgan Private Bank, reaffirmed her bullish outlook: “When we're looking at the portfolio, we want to have geopolitical hedges, safe-haven assets, Treasurys, dollar, gold — are not all performing in the same way and we do think gold is the best geopolitical hedge.” Peters maintained a forecast of $6,500 per ounce for gold by the end of 2026, citing ongoing central bank buying and support from institutional investors. Nitesh Shah, head of commodities and macroeconomic research for Europe at WisdomTree, agreed that the sell-off should be seen as a “healthy correction” and expects gold to reach $5,020 and silver $88 per ounce by year-end. Deutsche Bank echoed this optimism, reiterating its forecast of gold climbing to $6,000 per ounce by the end of the year.

Other analysts pointed to the complex interplay of factors behind the sell-off. Charles-Henry Monchau, chief investment officer at Syz Group, said the downturn began at the end of January due to fears about the Fed’s independence and expectations for the US dollar. Warsh’s nomination, he explained, prompted a rethink because of his reputation as a “hawkish dove” and his advocacy for reducing the Fed’s balance sheet. “There is also a question mark about Mr Powell staying on the board or not … so a lot of uncertainties and the market doesn't like uncertainties,” Monchau said on CNBC.

Max Kettner, chief multi-asset strategist at HSBC, urged investors not to panic. “If you look, for example, at gold and silver or the precious metals complex, one of the questions we've been faced with by investors throughout January was, well, how come this is a risk-on environment if precious metals rally at the same time?” he remarked on CNBC. “So, by extension, now the precious metals have come off, we can't have the same thing. We can't say, OK, precious metals are down. That's also really bad, and that leads to sort of panic mode.”

Meanwhile, the dollar’s strength—up 0.2% on February 2, after shedding 1.2% so far in 2026 and more than 9% in 2025—made dollar-priced bullion more expensive for overseas buyers, further weighing on demand. As reported by Reuters, the CME Group’s higher margin requirements and outflows from exchange-traded funds also contributed to the volatile environment.

Through all the turbulence, one thing remains clear: gold’s appeal as a scarce and historically reliable store of value continues to attract both institutional and retail investors. Only about 216,265 tonnes of gold have ever been mined, according to the World Gold Council, underscoring its rarity. While the current correction has been sharp, most analysts see it as part of the normal ebb and flow of a complex global market, rather than a harbinger of collapse.

The days ahead will likely bring more volatility, but for now, the gold and silver markets have reminded everyone just how quickly fortunes can change on the world’s financial stage.