Gold and Silver Plunge Nearly 30% as the Dollar Strengthens
The dollar index, which measures the greenback against a basket of six major currencies, rose 0.7% to 96.835. Meanwhile, the euro fell 0.6%.
Quick overview
- The U.S. dollar strengthened significantly following Kevin Warsh's appointment as the new Federal Reserve chair, leading to a sharp correction in metals and oil prices.
- Gold and silver prices experienced dramatic declines, with gold falling 8.8% and silver nearly 28% in a single session.
- The sell-off was attributed to profit-taking and macroeconomic factors, including the stronger dollar making dollar-denominated assets more expensive for international buyers.
- Oil prices also dropped amid signs of potential U.S.-Iran talks, although they remained on track for strong monthly gains due to ongoing geopolitical tensions.
The strengthening of the U.S. dollar following the designation of Kevin Warsh as the next chair of the Federal Reserve triggered a sharp correction in metals and weighed on oil prices and other key assets.
Gold and silver prices plunged by as much as nearly 30% on Friday, in a session marked by a stronger dollar after U.S. President Donald Trump confirmed the appointment of Kevin Warsh as the new head of the Federal Reserve, replacing Jerome Powell.
Spot gold fell 8.8% to $4,893.14 per ounce, while silver collapsed almost 28% to $83.96.
The sell-off—described by analysts as a broad profit-taking move—also pressured other precious metals. The drivers behind the sharp decline appear to be a combination of factors, ranging from the announcement of the incoming Fed chair to broader macroeconomic flows.
Whether we look at the dollar or real yield expectations, the combination of these factors helped trigger profit-taking. Trump nominated former Federal Reserve governor Kevin Warsh as his candidate to succeed Jerome Powell as Fed chair in May, placing a frequent critic of the central bank in one of the most influential economic roles.
Gold had reached a record high of $5,594.82 per ounce on Thursday and remains on track to post a nearly 16% gain for the month, marking its sixth consecutive monthly advance.
Stronger Dollar After Warsh Confirmation
Warsh’s nomination fueled a rapid appreciation of the U.S. dollar, which recovered part of the losses accumulated earlier in the week and rebounded from its lowest levels in nearly four years.
The dollar index, which measures the greenback against a basket of six major currencies, rose 0.7% to 96.835. Meanwhile, the euro fell 0.6%, the British pound slipped 0.5%, and the dollar gained 1% against the Japanese yen.
A stronger dollar makes gold and other dollar-denominated assets more expensive for international buyers, further amplifying the correction in precious metals.
Oil Prices Fall on Signs of Easing Tensions With Iran
Oil prices also declined on Friday amid indications that the United States may pursue talks with Iran over its nuclear program, easing concerns about potential supply disruptions from a U.S. military strike. Still, crude prices were heading toward strong monthly gains due to elevated geopolitical tensions.
Brent crude futures fell $1.10 to $69.61 per barrel, after rising 3.4% and closing Thursday at their highest level since July 31. The March contract expires on Friday. The more actively traded April contract slipped $1.29 to $68.30.
U.S. West Texas Intermediate (WTI) crude declined $1.25 to $64.17 per barrel, after also gaining 3.4% in the previous session.
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