Gold and silver prices fell sharply Friday after President Donald Trump said he is nominating former Federal Reserve Governor Kevin Warsh to lead the central bank, a move traders read as supportive of a firmer dollar and a more inflation-focused Fed.
The sell-off came after a rapid run-up that had pushed both metals to all-time highs this month and, in silver's case, above $100 an ounce.
By midday Friday, Barron's reported continuous gold futures were down 11% at $4,745 an ounce and silver futures were down 31% near $78.53 after both metals touched all-time highs earlier in the week.
The sell-off spread to mining shares, which often move more sharply than the underlying metals because revenue and margins are closely tied to bullion prices.
In Canada, the S&P/TSX Composite fell more than 2%, and the materials sector dropped 6.2% as gold slid.
In U.S. trading, the VanEck Gold Miners ETF (GDX), a widely used proxy for large gold producers, was down 13.6% in early afternoon pricing, and the Global X Silver Miners ETF (SIL) fell 14.8%, according to market data.
Investors often treat gold and silver as hedges against inflation and currency weakness, and they can sag when the dollar strengthens or when markets expect tighter monetary policy.
In a market note cited by Investing.com, Evercore ISI's Krishna Guha said Warsh's selection could help stabilize the dollar and reduce the risk of a deep, extended slide, a shift he linked to the drop in precious metals.
Trump's choice also landed in a politically charged moment for the Fed.
Current Fed chair Jerome Powell said in a Jan. 11 statement that the Justice Department served the Federal Reserve with grand jury subpoenas tied to his June 2019 Senate Banking Committee testimony about a renovation project, calling the action "unprecedented" in the context of pressure on the central bank.
Powell's second term as chair ends May 15. Warsh, a Stanford scholar, still needs Senate confirmation to succeed him.
Warsh previously served on the Fed's Board of Governors from February 2006 to March 2011.
Reuters contributed to this story.
Jim Thomas ✉
Jim Thomas is a writer based in Indiana. He holds a bachelor's degree in Political Science, a law degree from U.I.C. Law School, and has practiced law for more than 20 years.
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