Gold Prices Plunge After Fed Nomination Shakes Markets

Gold markets worldwide have been thrown into turmoil following a historic plunge on February 2, 2026, with spot gold prices tumbling over 9% to $4,403.29 per ounce—a single-day drop not seen since 1983, according to The Economic Times. The selloff’s ripple effects have left investors reeling, with silver suffering even steeper losses and industrial metals also taking a hit. At the heart of this dramatic turn lies a potent mix of political, economic, and technical forces that have converged to shake the precious metals sector.

The catalyst for this sharp correction was the surprise nomination of Kevin Warsh as the next chair of the US Federal Reserve by President Donald Trump. Warsh is widely regarded as hawkish on inflation, a stance that immediately led markets to anticipate fewer rate cuts and a higher terminal interest rate. As The Economic Times and Swiss financial sources reported, this expectation triggered a surge in the US dollar, which in turn reduced demand for gold—making it more expensive for holders of other currencies and dampening its appeal as a hedge.

"Markets quickly priced tighter policy and fewer rate cuts. That lifted real yields and strengthened the US dollar, both negative for non-yielding assets. Positioning was crowded after a parabolic rise, so stops and margin calls kicked in. The headline sped up selling that was already likely once momentum faded," explained Swiss media outlet Cash.ch.

The impact was immediate and brutal. Gold slid about 12% from its recent highs, while silver prices tumbled approximately 36%, according to Cash.ch. Silver’s crash was particularly pronounced, with a 13% drop on February 2 following a staggering 27% loss just the previous Friday, as cited by The Economic Times. The volatility was further amplified by the CME Group’s decision to raise margin requirements on metal futures, which forced traders to unwind leveraged positions rapidly. Higher margins increase trading costs, compelling investors to scale back exposure and accelerating the pace of the selloff.

But gold and silver were not alone in their descent. The commodities slump quickly spread across the board. Oil prices dropped nearly 5.5%, a move attributed to easing US-Iran tensions after President Trump indicated ongoing talks with Tehran and Iran signaled a pause in live-fire drills in the Strait of Hormuz. This development reduced supply fears and, coupled with the risk-off mood in markets, prompted profit-taking across commodities. Industrial metals were hit as well: copper fell nearly 5% on the London Metal Exchange, with aluminium, zinc, lead, nickel, and tin also recording heavy losses. High inventories and a lack of buying interest compounded the downward pressure on these metals.

For Swiss and European investors, the situation was further complicated by currency effects. Since gold is priced in US dollars, a strengthening greenback means Swiss investors face a double hit: not only does the metal fall in dollar terms, but the USDCHF exchange rate also drags down returns when converting back to francs. As Cash.ch explained, "Gold is priced in USD. When the dollar rises, the metal often falls in dollar terms, then Swiss investors also face an FX drag when converting to CHF. The two-step effect can deepen drawdowns."

In addition, Swiss investors in silver faced the added burden of value-added tax (VAT), which magnified the pain when prices swung sharply. The volatility also led to wider spreads at brokers and bullion dealers, making it more expensive to buy and sell physical metal or exchange-traded products (ETPs). Providers like ZKB issued product notices about potential collateral haircuts, creation halts, or temporary adjustments that could affect execution, further complicating the landscape for retail and institutional participants alike.

Technical factors played a significant role in the market’s behavior. According to Manav Modi, Senior Analyst at Motilal Oswal Financial Services Ltd., "Gold and silver ended the week on a sharply weaker footing after a violent correction from record highs, as a rebound in the US dollar and shifting expectations around US monetary leadership triggered heavy profit-taking." He noted that technical indicators such as the Relative Strength Index (RSI) had reached previous lows amid the price fall, suggesting some rebound could be possible. However, he cautioned that prices were "way out of the bollinger band and below the important support zones," with major support for gold near Rs 125,000 and resistance levels at Rs 155,000 and Rs 160,000. For the week, Modi recommended a range-bound stance, reflecting the uncertainty and volatility gripping the market.

Looking ahead, analysts remain divided on whether gold has further to fall or is poised for a comeback. Some see the recent plunge as a necessary correction after a parabolic rally, with position unwinding rather than weak fundamentals driving the move. Others warn that volatility could persist as markets digest US monetary policy signals and global growth prospects. "Despite short-term pressure, forecasts for gold remain mixed. Some analysts still expect higher prices later in the year if economic risks rise or rate expectations change," The Economic Times reported.

For investors navigating this turbulent environment, the advice is clear: caution is paramount. Monitoring US monetary policy, dollar movements, and technical signals such as momentum gauges, moving averages, and ETF flows will be crucial in assessing whether stability is returning. Risk management strategies—like staggered limit orders, partial FX hedges, and maintaining ample liquidity—can help avoid forced selling during volatility spikes. As Cash.ch advised, "Maintain enough cash to avoid forced selling during volatility spikes. Set a clear maximum allocation to precious metals and review it weekly while conditions stay jumpy."

Domestically, the Union Budget in India delivered no surprises for precious metals, keeping policy neutral, while upcoming decisions by the Reserve Bank of India, US jobs data, and PMI releases are set to influence price direction in the days ahead. For now, the consensus among experts is to stay patient, data-driven, and liquid, with a focus on process rather than prediction.

After a week that saw the steepest one-day fall in gold since the 1980s and a cascade of losses across the commodity spectrum, markets are left searching for a new equilibrium. Whether gold finds its footing or faces further turbulence will depend on a complex interplay of policy, technicals, and investor sentiment—and the world will be watching closely for the next move.