Gold and Silver Prices Drop Over 5% as Trump Prepares Fed Chair Announcement

TLDR

• Gold futures dropped 5.6% to $5,063.40 per ounce and silver futures fell 14% to $98.460 on Friday morning as markets awaited Trump’s Federal Reserve chair announcement
• Bloomberg reported President Trump plans to nominate Kevin Warsh, a former Fed governor known as an inflation hawk, as the new Fed chair with the announcement expected Friday morning
• The U.S. Dollar Index jumped 0.4%, contributing to precious metal weakness since a stronger dollar makes gold and silver more expensive for international buyers
• Gold climbed 17% and silver rallied 44% in January 2026, marking gold’s sharpest monthly gain since 1980, driven by safe haven demand from U.S. foreign policy actions
• Technical indicators like the relative-strength index had shown both metals were overbought, with gold’s RSI hitting 90, the highest level in decades

Gold and silver prices fell sharply on Friday morning as markets prepared for President Donald Trump to announce his pick for Federal Reserve chair. Gold futures dropped 5.6% to $5,063.40 per ounce. Silver futures declined 14% to $98.460.

Bloomberg News reported that Trump plans to nominate Kevin Warsh as the new Fed chair. Warsh previously served as a Fed governor and has a reputation as an inflation hawk. The announcement was expected Friday morning US time.

Both metals had reached record highs earlier in the week. Gold peaked at $5,626.80 per ounce. Silver hit $121.785 per ounce.

The selling began Thursday and accelerated into Friday. At one point, gold briefly fell below $5,000 per ounce. Platinum also dropped more than 10%.

The U.S. Dollar Index rose 0.4% early Friday. The index tracks the greenback against a basket of global currencies. A stronger dollar makes precious metals more expensive for buyers using other currencies.

ING FX strategist Francesco Pesole said a Warsh nomination is good news for the dollar. He noted it could reduce concerns about Fed independence. The selection may price out risks of a more dovish Fed chair choice.

Extraordinary January Rally Driven by Safe Haven Demand

Gold gained 17% since the start of January. Silver rallied 44% over the same period. These gains mark gold’s sharpest monthly increase since 1980.

Investors sought safe haven assets following U.S. foreign policy actions. These included the seizure of Venezuela’s former leader. Trump also threatened to annex Greenland and impose tariffs on allies.

The president recently warned of a possible strike on Iran. He stated he would place levies on countries providing oil to Cuba. This geopolitical uncertainty drove demand for precious metals.

Christopher Wong, a strategist at Oversea-Chinese Banking Corp, said the move validates a “fast-up, fast-down” pattern. He noted that while the Warsh report triggered the selloff, a correction was overdue.

Technical Indicators Signaled Overbought Conditions

Technical indicators had flashed warning signs before the decline. The relative-strength index showed both metals were overbought. Gold’s RSI recently hit 90, the highest level in decades.

This suggested the metals were due for a correction. The parabolic rallies had stretched technical indicators beyond normal ranges. Markets appeared to be waiting for a reason to unwind these extreme moves.

Michael Brown, a senior research strategist at Pepperstone, described Warsh as a monetary hawk his entire life. However, Brown noted Warsh recently supported lower interest rates. This aligns with Trump’s push for rate cuts.

Lower interest rates typically support gold and silver prices. Yet investors used the news to take profits from recent gains. Polymarket odds showed 94% probability of Warsh getting the nomination.

Brown stated that price action over the next few days will be critical. He identified $5,000 per ounce for gold and $100 per ounce for silver as key levels. The metals moving sideways would signal market stabilization.

Despite the sharp decline, gold remains up around 17% for January. Silver still shows gains of approximately 43% for the month. The correction came after both metals achieved unprecedented price levels.

Trump and Senate Democrats reached a tentative deal to avoid a government shutdown. The White House continues negotiating on immigration raid limits. Volatility appears set to remain a feature of precious metal trading.

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