Gold and silver prices plunge after Warsh's Fed nomination

Tuesday 03 - 16:20

By: Dakir Madiha

Gold and silver prices plunge after Warsh's Fed nomination

A massive sell-off swept global commodity markets on February 2, 2026, hammering gold, silver, oil, and industrial metals as investors reacted to President Donald Trump's nomination of Kevin Warsh as the next Federal Reserve chair. The rout rippled through stock markets worldwide, with Asian exchanges suffering the steepest drops amid leveraged traders rushing to meet margin calls.

Gold tumbled as much as 9% to two-week lows, while silver plunged over 13% just days after both hit record highs. The precious metals crash sparked forced selling across asset classes, with analysts calling the volatility unmatched in recent memory.

Bruce Ikemizu, director of the Japan Bullion Market Association and former head of precious metals trading at ICBC in Tokyo, remarked after 40 years in the market that this level of swings stands unparalleled.

Multiple factors fuel the price crash

The downturn worsened after CME Group raised margin requirements for precious metals futures over the weekend. Gold contract margins jumped from 6% to 8%, and silver's from 11% to 15%, forcing traders to post extra collateral. Higher capital demands curbed speculation and unleashed position liquidations.

Zain Vawda, analyst at MarketPulse by OANDA, explained that elevated margins make holding positions less appealing and compel cash-strapped traders to sell. This creates a feedback loop: falling prices trigger margin calls, spurring more sales and deeper declines.

A stronger U.S. dollar added pressure on dollar-denominated commodities. The dollar index topped 97, up about 1% Friday post-nomination, as markets viewed Warsh's pick as hawkish compared to alternatives.

Oil prices dropped nearly 5%, heading for their biggest single-day fall in over six months, after Trump said Iran was "talking seriously" with Washington—easing fears of military conflict that had buoyed crude through January. Brent settled at $66.30 per barrel, West Texas Intermediate at $61.60.

Markets reassess Fed policy path

Markets see Warsh, a Fed governor from 2006 to 2011, as favoring lower rates but less aggressively than other contenders. His expected hawkish stance on shrinking the Fed's balance sheet bolstered the dollar and undermined the depreciation strategy fueling metals' surge.

The commodity rout hit global stocks. South Korea's Kospi plunged 5.26%, triggering circuit breakers; Indonesia's composite fell 4.88%. Hong Kong's Hang Seng lost 2.2%, Shanghai 2.5%. U.S. futures pointed lower at open but recovered, with the Dow Jones Industrial Average closing up 515 points.

Copper extended its retreat from record highs, down over 5% on the London Metal Exchange to around $12,400 per tonne a 15% drop from its peak. Aluminum, tin, and nickel posted heavy losses too.

Some analysts urged calm. Barclays noted in a Monday research report that rate cut expectations, monetary easing, and de-dollarization trends should sustain long-term gold investment demand.