After sustaining their rally for weeks, safe-haven assets gold and silver were hit with a sharp decline on Friday ahead of Trump’s nomination of the new Federal Reserve chair Kevin Warsh.
Silver plunged by as low as 15% to hit $95 an ounce, while gold slipped nearly 9% to $4,941.79 an ounce.
The white metal had closed at $115.6 an ounce the previous day. On the Multi Commodity Exchange (MCX), silver futures crashed by more than 15% or Rs 45,000 to about Rs 3.5 lakh per kg, after peaking to record high of Rs 4,20,048 per kg on Wednesday.
On the contrary, the US dollar has ticked upwards, cheering higher likelihood of Warsh succeeding Jerome Powell.
As of 8:45 a.m. EST, spot gold traded over 6% lower at $5,034.10 an ounce, spot silver traded 15.55% lower at $97.58 an ounce, while USD futures rose 0.39% to 96.52.
Now, with the “inflation hawk” Warsh in place, the rates of these metals are likely to traverse through rough terrains. Warsh is known for his hawkish monetary stances along with his advocacy of tighter monetary policies.
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His tenure will likely result in an appreciation of the US greenback, which may drive investors away from safe haven assets such as gold and silver.
However, his view appears to have softened over the last few months. Warsh has aligned closely with Trump’s push for lowering interest rates and has been seen arguing in favour of the same.
Still, analysts expect him to revert back to old ways as soon as inflation pressures start mounting.
“He’s a former Fed governor, and while he did have a reputation as being an advocate of tighter monetary policy… he’s recently been publicly advocating for a fresh cut in interest rates, aligned with Trump’s thinking,” Susannah Streeter, chief investment strategist, Wealth Club told news agency Reuters.
“However, his experience and past attitude imply he’s likely to hold the line if sharp inflationary pressures return,” she added.
Apart from the yellow and white metals, US stock futures were also down with Warsh’s announcement as the next Fed chair.
