Big declines in gold and silver prices have pushed commodity prices lower since President Donald Trump announced his nomination of Kevin Warsh to lead the Federal Reserve.
After months of enormous gains in gold and silver prices, which are considered risk assets, sellers began offloading in droves on Friday, a sell-off that has continued to some extent on Monday. The moves come as markets try to interpret what Warsh as Fed chairman might mean.
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Gold prices slipped more than 1% on Monday to about $4,700 per ounce but collapsed more than 10% on Friday. Silver was about even on Monday after a historic plunge on Friday, where at one point, it was down 36% — its biggest single-day decline since 1980.
The fallout comes after Trump nominated Warsh, a former Fed governor, to helm the central bank. But to understand the big declines, it’s worth noting just how much gold and silver prices have risen over the past few months.
On Friday, gold was up nearly 47% over the past six months and 73% over the past year. Even after the collapse on Friday, silver futures were still up a whopping 122% over six months and more than 157% from a year ago. As of Monday, copper was down 2% but up more than 34% from a year ago.
Gold and silver are seen as safe-haven assets, so people turn to them when there is economic uncertainty or geopolitical upheaval. Some of the global uncertainty in the financial markets this year has stemmed from sweeping tariffs and other trade escalations since Trump entered office.
Trump’s pick of Warsh came as a surprise to some, who expected National Economic Council Director Kevin Hassett, long viewed as the front-runner, to get the nod. Some worried that Hassett was a yes-man for Trump, a concern that comes as Fed independence is under the microscope.
Trump has been pushing Fed Chairman Jerome Powell to slash interest rates, despite too-high inflation. Although Warsh has been a bit of a hawk on monetary policy in the past, which might have reassured markets that there will be more balance with the Warsh pick over Hassett.
David Sacco, an instructor in finance and economics at the University of New Haven’s Pompea College of Business, told the Washington Examiner that he thinks the Warsh choice was probably the “trigger” for the sell-off.
The sell-off continued apace as investors moved away from safe-haven assets and began to sell their holdings.
“That was one of the big news items that came out that triggered a lot of this,” Stephen Kates, a financial analyst at Bankrate, told the Washington Examiner. “And I think there was some momentum in there as selling begets selling.”
While gold and silver are both safe-haven assets, silver has gotten outsize attention from investors this past year. It is not completely used as a flight to safety or merely as an investment, as is the case with gold.
K. Geert Rouwenhorst, a professor of corporate finance at Yale University, explained that silver has a sort of “dual feature” to it, where it also has practical and industrial uses that are driving demand.
“What’s happened simultaneously over the last year — there are sort of all the investments that have been taking place in AI and AI-related investments such as data centers and things like that — and much of that, the hardware of that is all related to industrial metals,” he said.
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The decline in gold and silver has led the overall commodity market lower.
The S&P GSCI, which serves as a benchmark for investment in the commodity markets, was down nearly 3.9% on Monday after falling even more sharply on Friday.