Precious Metals Drop on Kevin Warsh Fed Appointment

Gold and silver extended their losing streak for a fourth consecutive day on Feb. 2, following a sharp sell-off last week. The drop came in response to US President Donald Trump’s nomination of Kevin Warsh to lead the Federal Reserve, a strengthening dollar, and widespread profit-taking.

Spot gold opened February at US$4,655.01/oz, down 1.8%, extending its four-day losing streak and marking a 13.7% decline since last week. The metal has shed nearly US$740 from its record high of US$5,400.25 reached on Jan. 28, erasing most of its early-year gains, though it still posts a 6.6% increase for 2026 so far. Silver similarly slipped 2.92% to US$79.16/oz, continuing its four-day slide and falling 31.85% from its late-January peak of US$116.61, even as it retains an 11% year-to-date gain.

Heightened market volatility has been fueled in part by increased margin requirements at CME Group, which compelled leveraged funds and retail traders to liquidate positions. Felipe Mendoza, CEO, IMB Capital Quants, noted that the announcement of Kevin Warsh as Fed chair helped ease investor concerns over central bank independence, reducing the appeal of safe-haven assets like gold. Gabriela Siller, head of analysis, Banco Base, added that profit-taking, coupled with lower risk aversion, contributed to the pullback, observing that Warsh is viewed as relatively neutral despite his inclination toward rate cuts.

Mining equities followed the decline in metals prices. On Wall Street, McEwen Mining shares plunged 19.3%, Kinross Gold dropped 17.1%, Newmont fell 14.5%, and Agnico Eagle decreased 14.4%. In Toronto, Orla Mining and Endeavour Silver tumbled 23.2% and 21.5%, respectively. South African miners AngloGold Ashanti and Gold Fields also suffered losses of 15.7% and 14.4% as metals prices weighed heavily on global mining stocks.

Prices Fall After Fed Nomination Last Friday

On Jan. 31, precious metals extended their decline, as recent market volatility was largely driven by unfolding developments at the Federal Reserve.

On that day, President Donald Trump announced his intention to nominate Kevin Warsh as the next chair of the Federal Reserve. Warsh, a former Fed governor with experience in public service, private investment, and academia, is known for supporting lower interest rates while also emphasizing the importance of maintaining the Fed’s institutional independence. Market experts noted that Warsh’s nomination eased fears of political interference in monetary policy, which had previously unsettled investors, given Trump’s repeated criticism of Fed Chair Jerome Powell.

“This decision confirms that neither Kevin Hassett nor Rick Rieder are front-runners,” noted Derek Halpennym, Head of Research, Global Markets EMEA & International Securities, MUFG. Both had been perceived by markets as “inexperienced, too close to President Trump, and therefore susceptible to influence” from him. The president had sought these appointments after intensifying pressure on the central bank, particularly on Fed Chair Jerome Powell, to cut interest rates.

According to Halpenny, Kevin Warsh is a rate-cut supporter but also a strong advocate of Fed independence, meaning “fears that the institution’s independence will erode should now disappear.”

Trump had repeatedly attacked Powell for his cautious approach to rate cuts, labeling him a “stubborn mule” and suggesting he could be removed from office. Powell, appointed by Trump in 2018 and reappointed by President Biden, remains a member of the Federal Reserve Board until 2028. His continued presence ensures continuity and limits the president’s influence over policy decisions in the near term, reinforcing the Fed’s independence despite political pressures.

Interest Rate Context and Fed Independence

In the United States, interest rates are set collectively by the 12-member Federal Open Market Committee (FOMC), not unilaterally by the Fed chair, though the chair traditionally plays a key role in shaping discussions and guiding consensus among committee members. The Fed’s dual mandate requires it to balance two objectives: keeping inflation in check and supporting full employment.

During 2022 and 2023, the central bank sharply raised interest rates from near-zero levels to their highest in decades, aiming to curb historically high inflation. Since then, the Fed has eased rates cautiously, cutting them by 1% in late 2024 and by another 0.75% from September onward. Its most recent policy meeting left the benchmark rate unchanged, reflecting ongoing caution amid economic uncertainty.

President Trump has publicly criticized the Fed’s incremental approach. On Dec. 10, he emphasized the need for more decisive action, stating that US rates “should be much lower” and that he expects his perspective to be considered. “My voice should be heard… I have made a lot of money, I have been very successful, and I think my role should be at least that of recommending. They do not have to follow what I say.”

Trump has also clashed with the Fed over board appointments, notably attempting to remove member Lisa Cook over alleged mortgage fraud. The courts have blocked this action while her legal challenge proceeds, highlighting the Fed’s protected independence under federal law, which allows board members to be dismissed only for cause. Economists caution that any erosion of this independence could undermine the Fed’s credibility, increase inflationary risk, and encourage policy decisions driven more by short-term political considerations than long-term economic stability.

Outlook for Precious Metals in 2026

While precious metals prices are declining, experts agree these are entering 2026 with notable momentum. Silver experienced an extraordinary rally in January, surging nearly 50% over the month alone. Citigroup forecasts that spot silver could reach US$150/oz within the next three months. On Jan. 26, silver set a new record at US$117.7/oz, including a single-session gain of 14%, the largest since the 2008 financial crisis. Citigroup notes that if the gold-to-silver ratio reverts to its 2011 low of 32:1, silver prices could climb as high as US$170/oz.

Gold continues to serve as the market’s primary safe-haven asset, maintaining prices above US$5,100/oz, with year-end expectations near US$5,200/oz. Factors supporting gold include central bank purchases, geopolitical tensions, and inflows into exchange-traded funds (ETFs). HSBC projects continued volatility, estimating a trading range of US$3,950/oz–US$5,050/oz through 2026.