A wave of selling swept through precious metals markets as investors reacted to President Trump’s nomination of Kevin Warsh for Federal Reserve chair, viewing the selection as reducing risks to central bank independence. Gold suffered an 8% decline to $4,465 per ounce on Monday, while silver dropped 7% following Friday’s already devastating 30% plunge. The sudden reversal marks a dramatic end to a rally that had pushed both metals to successive record highs in recent weeks.
Market participants had increasingly sought refuge in precious metals amid dual concerns about escalating geopolitical tensions and potential political interference with Federal Reserve operations. Warsh’s nomination addresses at least one of these anxieties, as his background as a former Fed governor and respected central banker suggests he will maintain institutional independence rather than serving as a political instrument. Trump’s clarification that he hadn’t extracted rate cut commitments from Warsh further bolstered confidence.
The description of recent trading as a “meltdown” captures the intensity and scope of the correction, which extended far beyond precious metals. Industrial commodities bore similar punishment, with platinum and copper declining 10% and 9% respectively. This broad-based selling suggests a fundamental reassessment of risk rather than isolated profit-taking in specific markets.
Stock markets absorbed the commodity shock with predictable weakness, as futures indicated coming losses for major US indices and European markets opened lower. Companies in the mining sector, particularly those focused on precious metals extraction, led declines with losses exceeding 5% for several major players. Meanwhile, bitcoin’s 9% weekend decline and oil’s 5% drop illustrated how the risk-off positioning extended across diverse asset classes.
Positioning data from Jefferies reveals that gold had become extremely crowded on the long side before the correction, with indicators reaching eight on a scale from negative ten to positive ten. The recent selling has reduced this to just above four, suggesting substantial speculative excess has been purged from the market. Year-over-year performance remains impressive, with gold up 65% and silver soaring 120%, indicating the correction represents a pause rather than a trend reversal.