Trump’s Fed Pick Sparks Brutal Gold and Silver Sell-Off

Economic

Summary:

Gold and silver extend historic losses following Trump's nomination of Kevin Warsh as new Fed chair, deepening the precious metals rout.

Gold and silver prices extended last week’s dramatic sell-off on Monday, as investors continued to digest the implications of President Donald Trump’s announcement of Kevin Warsh as the next chair of the US Federal Reserve.

The move has fuelled expectations of a more government pressure on the Fed and prompted a sharp reassessment of positions across precious metals.

Spot gold fell as much as 10% in early trading, while silver plunged up to 16%, following Friday’s rout that marked the largest intraday decline on record for the white metal.

The scale and speed of the move underscored how vulnerable the market had become after months of aggressive buying driven by geopolitical tension and bets on looser US monetary policy.

“The sharp selloff on Friday followed news that US President Donald Trump intends to nominate Kevin Warsh as the next Federal Reserve chair – a development that boosted the US dollar and reinforced expectations of a more hawkish policy stance,” said Ewa Manthey, commodities strategist at ING, and Warren Patterson, head of commodities strategy.

“While a correction was overdue after the intense rally, the scale of Friday’s decline far exceeded most expectations.”

Why the Fed matters for gold

Gold and silver are particularly sensitive to US interest-rate expectations.

Higher rates increase the opportunity cost of holding non-yielding assets such as precious metals, while a stronger dollar makes them more expensive for overseas buyers.

Warsh, a former Fed governor, has voice sentiments supportive of Trump's vision for the Fed, including regular rate cuts.

That reassessment has been swift. Investor caution has been evident in exchange-traded funds, with silver holdings falling for a seventh consecutive session to their lowest level since November 2025.

Futures data also show speculators cutting back sharply on bullish bets, signalling a broader retreat from the sector.

“CFTC positioning shows a cooling in speculative interest across precious metals,” the ING report continued.

“Managed money net longs in COMEX gold fell by 17,741 lots last week… Speculators also cut net longs in silver… taking positioning to its lowest since February 2024.”

Margins rise, volatility bites

Market stress has been amplified by mechanical factors.

CME Group is set to raise margin requirements on COMEX gold and silver futures after last week’s historic swings, forcing traders to post more collateral or reduce exposure.

Such moves tend to accelerate sell-offs, particularly in heavily leveraged markets.

Attention is now turning to Asia, where Chinese investors have historically provided support during price dips. However, with volatility elevated and the Lunar New Year approaching, participation may be more cautious than usual.

“With volatility spiking and the Lunar New Year approaching, traders are likely to pare back positions and reduce risk,” the ING analysts said.

“Price direction in the near term will hinge on the extent of dip-buying from Chinese investors following Friday’s retreat.”

Outlook remains fragile

For now, the precious metals market remains at the mercy of macro forces, with little clarity on how quickly sentiment will stabilise.

Investors are watching US data closely for clues on real interest rates and the dollar’s next move, both of which will be shaped by expectations around the Fed’s future direction.

“Overall, volatility across precious metals is likely to remain elevated in the near term,” Manthey and Patterson said.

“For gold and silver, macro uncertainty, real rate expectations, and USD direction will continue to dominate sentiment,” the report concluded.

Source: Euronews

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Adam

Economic

Asia Market Wrap - Asian markets volatile after last week's selloff

Japan's stock market had a rough Monday, with the Nikkei index dropping 1.2% for its biggest weekly loss. The day actually started well because a weak yen helped exporters and positive election news for Prime Minister Sanae Takaichi boosted confidence.

However, that optimism vanished when technology and mining stocks tanked. The main trigger was bad news for the AI industry: reports surfaced that Nvidia might cancel a massive $100 billion investment in OpenAI, which caused tech stocks to plummet across Asia, including a 4% drop in South Korea’s Kospi index.

Meanwhile, Indonesia's stock market is facing its own crisis, losing over $80 billion in value recently. Investors are pulling their money out of the country because they are losing faith in President Prabowo Subianto’s economic plans and are worried about a lack of transparency in how the markets are run. Things have become so concerning that a major global index provider warned Indonesia might be downgraded to "frontier status," which essentially means it would be seen as a much riskier and less developed place to invest.

Euro Zone output rebounds

Europe’s manufacturing sector is still struggling, marking its third straight month of decline. While a key survey showed that factories are actually starting to produce more goods again, the overall industry is shrinking because new orders continue to drop. Think of it like a factory that is running its machines but doesn't have enough new customers to keep the momentum going.

On top of that, factories have been cutting jobs for nearly three years, though the layoffs are finally starting to slow down.

The situation across Europe is very "hit or miss" depending on the country. Greece and France are seeing their factories grow, with France hitting its best streak in over three years. However, the biggest economies like Germany, Italy, and Spain are still stuck in a slump.

Making matters worse, the cost of raw materials and energy is rising at the fastest rate in three years, but factories aren't able to raise their own prices to cover those costs, which puts a squeeze on their profits.

Despite these current headaches, there is a glimmer of hope. Factory owners are feeling more confident about the future than they have since early 2022, betting that things will eventually turn around later this year.

European Session - European stocks start the month in the red

European stock markets started February on a low note, with major indexes like the STOXX 50 and STOXX 600 both losing value. This decline followed a global trend where investors pulled their money out of riskier investments.

Two main factors caused this: first, a massive sell-off in commodities like oil and metals, and second, renewed worries that Artificial Intelligence (AI) companies might be overvalued.

The mood shifted largely because of news from the US and the tech world. Investors are nervous about Kevin Warsh being nominated to lead the US Federal Reserve, fearing he will take a "tougher" approach to the economy.

At the same time, a report revealed that Nvidia is reconsidering a massive $100 billion investment in OpenAI, which caused tech stocks to slide.

While big energy and mining companies like Shell and Rio Tinto saw their stock prices drop, some consumer companies like Nestlé and Unilever actually managed to gain value as investors looked for safer places to put their money.

On the FX front, the US dollar remained strong on Monday as investors processed the news that Kevin Warsh has been nominated to lead the Federal Reserve. This nomination has given the dollar a boost because traders expect Warsh to be more focused on controlling inflation.

Meanwhile, the Japanese yen is back in the spotlight after Prime Minister Sanae Takaichi spoke in favor of a weaker currency to help Japanese exporters. This message contradicts her own finance officials, who have been trying to stop the yen from losing too much value, leading to some confusion and volatility in the market.

In Europe and the UK, the euro and the pound remained mostly steady as investors wait for upcoming interest rate decisions from their central banks later this week.

Elsewhere, the Australian dollar fell slightly before its own central bank meeting, while the Canadian and New Zealand dollars also saw small drops.

Additionally, the dollar grew stronger against the Norwegian krone because oil prices crashed by 5%.

Currency Power Balance

Oil prices took a sharp dive on Monday, falling about 5% after President Donald Trump suggested that tensions with Iran were cooling off.

Prices had reached high levels in January because people were worried a conflict might disrupt global oil supplies, but those fears eased when Trump mentioned that Iran was "seriously talking" with the US government. Because the risk of a military strike has faded, both global Brent crude and US oil prices dropped by over $3.50 per barrel, erasing some of the big gains seen last month.

Beyond the news out of the Middle East, other factors are also helping to push prices down. Oil production in places like the US and Kazakhstan is back on track after recent disruptions, meaning there is more oil available for everyone. Between the increase in supply and the decrease in political drama, the pressure that was keeping energy prices high has finally started to lift.

On Monday, precious metals continued their slide in the Asian session. Prices for gold, silver, oil, and industrial metals all fell sharply, mostly because investors are reacting to the news that Kevin Warsh has been chosen as the next leader of the Federal Reserve.

Market participants are worried that Warsh will be "tougher" on the economy, which led to a massive wave of selling that has lasted for two days straight.

Gold prices dropped 5% to their lowest level in weeks, while silver fell more than 7%, a shocking reversal after both reached record highs just last week.

The selling got even more intense because the main exchange for these metals (CME Group) decided to raise the "down payment" (called a margin) required to trade them. This move forced many traders to sell their holdings because they didn't have enough cash to cover the new, higher costs.

This follows a historic "crash" that started on Friday, which saw gold suffer its biggest one-day drop since 1983 and silver plunge by 27%, the largest daily loss ever recorded for the metal.

Gold and Silver bulls are showing some life here in early European trade with Gold recovering to trade around the $4700/oz mark.

Economic Calendar and Final Thoughts

Data is largely thin today with Euro Area PMI released already.

There will be some earnings releases from the US before the market open with Disney reporting results.

In the US session we will get some key PMI data releases and some Fed speakers.

The US dollar is starting to gain strength again. Over the past week, the dollar’s value had been dropping because people were worried the government might intentionally weaken it (a trend known as the "de-basement trade").

However, that trend has reversed now that President Trump has nominated Kevin Warsh as the next head of the Federal Reserve. Because investors were previously over-invested in gold and silver, they are now selling those metals and moving their money back into the dollar, which is helping the currency bounce back.

I was and remain of the belief that the dollar’s recent drop didn't actually match the reality of the US economy, so this recovery makes sense.

Moving forward, the dollar’s value will likely be driven by new economic reports and changes in interest rates rather than just rumors. For now, the expectation is that the dollar will continue to get stronger in the coming days as the market stabilizes.

Markets Today: Euro Zone output rebounds, gold and silver extend slide, FTSE 100 resilient_2

Chart of the Day - FTSE 100

From a technical perspective, the FTSE 100 index has broken back above the 100-day MA.

The FTSE showed resilience last week in the face of a broad market selloff with the index holding comfortably above the 10000 point handle.

This in my view is crucial as it keeps the bullish momentum intact.

Looking to further upside potential and a four-hour candle close above the swing highs resting at 10273 is needed.

A move lower from here may find support at the 200-day MA at the 10039 handle before the 10000 handle comes into focus.

FTSE 100 Index Daily Chart, February 2, 2026

Source: marketpulse

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Ukadike Micheal

Economic

Traders' Opinions

Central Bank

Bond

India's 10-year bond yield surged to its highest level in over a year on Monday, as the government's larger-than-expected borrowing plan unsettled the market ahead of a key central bank policy meeting.

The benchmark 10-year 6.48% 2035 bond yield closed at 6.7662%, a notable increase from Friday's 6.6963% and its highest point since January 17, 2025. This year alone, the 10-year yield has climbed approximately 18 basis points, reflecting mounting concerns over debt supply that have now been amplified by the new budget.

Record Government Borrowing Rattles Markets

The primary driver behind the market's reaction was the federal budget's announcement of a record gross borrowing of 17.2 trillion rupees ($187.99 billion) for the 2026–27 fiscal year. This figure significantly overshot the 16.3 trillion rupees that analysts had forecasted in a Reuters poll.

According to rating agencies, the budget signals a slower, more gradual approach to fiscal consolidation. The government has set the following targets for the next fiscal year:

• Debt-to-GDP Ratio: 55.6%

• Fiscal Deficit: 4.3% of GDP

This increased borrowing plan has intensified pressure on the bond market, adding to existing worries about high levels of state debt.

Traders Shift Strategy, Eye Short-Term Notes

In response to the budget, traders began adjusting their portfolios by trimming positions in longer-duration bonds.

Simultaneously, there has been a clear pivot towards shorter-term debt, specifically 1-to-3-year notes. This move is based on the expectation that the Reserve Bank of India (RBI) will continue its liquidity operations, which are anticipated to keep a cap on short-end yields.

All Eyes on RBI Amid Liquidity Support

Market participants are closely watching for further liquidity measures from the RBI. The central bank has already been active, purchasing 126.55 billion rupees of bonds from the secondary market in the week ending January 23. Furthermore, the RBI has included liquid papers and the former benchmark 6.33% 2035 bond in this week’s 500 billion-rupee bond-buying plan.

The consensus among traders is that the RBI will hold interest rates steady at its policy decision this Friday.

"The budget is positive for growth and neutral for inflation, so we do not expect this to materially influence the RBI at its next MPC meeting on 6 February, where we expect repo rate to be left unchanged," stated analysts at Nomura in a research note.

OIS Curve Steepens as Long-Term Rates Climb

The Overnight Indexed Swap (OIS) curve steepened on Monday, reflecting the broader trends in the government bond market.

Longer-end swap rates climbed, while short-term swaps saw increased receiving interest due to the RBI's ongoing liquidity support. The one-year OIS rate fell by 1 basis point to 5.5450%. In contrast, the two-year rate rose 1.25 bps to 5.72%, and the five-year OIS rate climbed 3.25 bps to 6.1950%.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Ukadike Micheal

Russia-Ukraine Conflict

Remarks of Officials

Political

Dmitry Medvedev, a top Russian security official, has sounded the alarm over the imminent expiration of the last major nuclear arms control treaty between Russia and the United States. He warned that letting the New START treaty lapse without a clear path forward could accelerate the symbolic "Doomsday Clock."

The treaty, which Medvedev himself signed in 2010 as Russia's president, is set to expire on Thursday. Without a last-minute agreement, the constraints on strategic nuclear arsenals will be removed.

Dmitry Medvedev, Deputy Chairman of Russia's Security Council, warns of rising global tensions as a key nuclear arms treaty expires.

In an interview with Reuters, TASS, and Russian war blogger WarGonzo, Medvedev cautioned against complacency. "I don't want to say that this immediately means a catastrophe and a nuclear war will begin, but it should still alarm everyone," he stated.

Referring to the symbolic gauge of global existential risk, he added, "The clocks are ticking and they obviously have to speed up."

Washington's Gamble on a "Better Agreement"

U.S. President Donald Trump has signaled he is prepared to let the treaty expire. Moscow had offered to voluntarily extend the treaty's caps on strategic nuclear weapon deployments, but Trump appears to be holding out for a different deal. "If it expires, it expires... We'll just do a better agreement," Trump told the New York Times last month.

The U.S. has also pushed for China, the world's third-largest nuclear power, to be included in arms control negotiations. However, Beijing has shown no interest in participating.

Russia's Stance Amid Strained Relations

Medvedev, 60, is a close ally of President Vladimir Putin and currently serves as the deputy chairman of Russia's Security Council. His comments are often viewed by foreign diplomats as a reflection of hardline thinking within the Russian elite.

Although relations with the U.S. were severely strained by the conflict in Ukraine, they have seen some improvement since Trump returned to the White House last year, with American envoys working to mediate an end to the fighting.

When asked about Trump, Medvedev stated that Moscow respects the American people's choice of president and noted that increased contact with Washington was encouraging.

Despite this, he described the world as a dangerous place but clarified Russia's intentions. "We are not interested in a global conflict," Medvedev said. "We're not crazy." In contrast, he was fiercely critical of European leaders, labeling them a "gang of dimwits" who he claimed had damaged their own economies in a failed attempt to defeat Russia.

A Pivot to Military and Technological Strength

Addressing Russia's military capabilities, Medvedev said that while specific production figures for artillery and drones are classified, output has surged "many times" since the war in Ukraine began. He asserted that Russia has adapted effectively to the demands of modern drone warfare.

"I believe that our defence industry is working like clockwork today," he said. "We have increased production volumes very quickly."

Looking beyond military hardware, Medvedev, who positioned himself as a modernizer during his 2008-2012 presidency, stressed that Russia cannot afford to lag in critical technologies. He identified generative Artificial Intelligence, synthetic biology, and quantum computing as key areas of focus.

"We are in this race with the others," he said. "The main thing here is not to fall far behind. There was a period in our country when, due to the collapse of the (Soviet) Union, we didn't do much research - we just tried to survive."

Risk Warnings and Disclaimers

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Isaac Bennett

Remarks of Officials

Palestinian-Israeli conflict

Middle East Situation

Political

U.S. Special Envoy Steve Witkoff is at the center of diplomatic efforts in the Middle East.

Senior U.S. envoy Steve Witkoff is scheduled to travel to Israel for high-level meetings with Prime Minister Benjamin Netanyahu and the country's top military chief, according to two senior Israeli officials. The visit is expected to begin on Tuesday.

High-Stakes Agenda: Gaza War and Iran

Witkoff's trip comes at a critical time, with regional tensions escalating over Iran and the Trump administration actively pursuing its plan to resolve the Gaza war.

The diplomatic push occurs as both Washington and Tehran signal a willingness to restart negotiations. The focus is on reviving talks to address the long-standing nuclear dispute and reduce the risk of a wider regional conflict.

Coordinating Strategy Ahead of Potential Talks

According to a third Israeli official, Witkoff's discussions are designed as preparatory sessions before any potential resumption of talks with Iran.

The meetings will also build on recent military coordination, following a weekend meeting in Washington between Israeli military chief Eyal Zamir and his American counterpart, General Dan Caine.

Tense Backdrop of Military Buildup

The geopolitical situation remains tense, underscored by a recent U.S. military buildup in the region. This follows a violent crackdown on anti-government protests in Iran last month, which marked the most severe domestic unrest in the country since its 1979 revolution.

Risk Warnings and Disclaimers

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Warren Takunda

Stocks

U.S. futures and world shares skidded on Monday as worries over President Donald Trump’s nominee to be the next Federal Reserve chair amplified jitters over a possible bubble in the artificial intelligence boom.

South Korea’s exchange, which is heavily influenced by tech-related developments, briefly suspended trading as its benchmark Kospi bounced, closing 5.3% lower at 4,949.67. Samsung Electronics gave up 6.3%, while chip maker SK Hynix sank 8.7%.

The Kospi has been forging records for weeks as big tech companies piggybacked on the AI craze with deals with major players like chip maker Nvidia and OpenAI.

In early European trading, Germany’s DAX edged less than 0.1% lower to 24,528.57. The CAC 40 in Paris shed 0.2% to 8,108.56, while Britain’s FTSE 100 declined 0.3% to 10,195.88.

The future for the S&P 500 sank 0.7%, while that for the Dow Jones Industrial Average fell 0.4%.

Markets took a hit as investors considered how Kevin Warsh, Trump’s nominee to lead the Federal Reserve after Fed Chair Jerome Powell’s term ends in May might handle interest rates.

Warsh’s nomination requires Senate approval. But financial markets fear the Fed may lose some of its independence because of Trump, who has pushed hard for more and faster rate cuts. That fear has helped catapult skyward the price of gold and weaken the U.S. dollar’s value over the last year.

“People do not get handed the keys to the most powerful central bank on earth because they plan to drive in the opposite direction of the people who gave them the keys,” Stephen Innes of SPI Asset Management said in a commentary.

Early Monday, the price of gold fell 1.9%, while silver bounced back slightly, gaining 0.2%. Both plunged Friday as record runs in precious metals markets ground to a halt.

On Friday, the price of gold dropped 11.4%, suddenly losing momentum after a tremendous rally where it roughly doubled over 12 months. It topped $5,000 for the first time on Jan. 26 and was around $5,600 at one point on Thursday.

Silver, which had been on a similar, jaw-dropping tear, plunged 31.4%.

U.S. benchmark crude oil lost $3.46 to $61.75 per barrel, while Brent crude, the international standard, fell $3.47 to $65.85 per barrel.

Speaking to reporters during the weekend, Trump said Iran should negotiate a “satisfactory” deal to prevent the Middle Eastern country from getting any nuclear weapons.

“I don’t know that they will. But they are talking to us. Seriously talking to us,” he said.

That comment apparently assuaged some worries over potential disruptions to oil supplies that had pushed prices higher, analysts said.

In Tokyo, the Nikkei 225 gave up early gains, sinking 1.3% to 52,655.18.

Hong Kong’s Hang Seng dropped 2.2% to 26,775.57, while the Shanghai Composite index sank 2.5% to 4,015.75.

In Australia, the S&P/ASX 200 fell 1% to 8,778.60.

Taiwan’s Taiex lost 1.4%.

On Friday, the S&P 500 dropped 0.4% and the Dow lost 0.4%. The Nasdaq composite lost 0.9%.

The Fed chair has a big influence on the economy and markets worldwide by helping to dictate where the U.S. central bank moves interest rates. That affects prices for all kinds of investments, as the Fed tries to keep the U.S. job market humming without letting inflation get out of control.

A report released Friday showed U.S. inflation at the wholesale level was hotter last month than economists expected. That could put pressure on the Fed to keep interest rates steady for a while instead of cutting them, as it did late last year.

The longtime assumption has been that the Fed should operate separately from the rest of Washington so that it can make moves that are painful in the short term but necessary for the long term. To get inflation down to the Fed’s goal of 2%, for example, may require the unpopular choice to keep interest rates high and grind down on the economy for a while.

In other action early Monday, the dollar fell to 154.88 Japanese yen from 154.94 yen. The euro was unchanged at $1.1853.

Source: AP

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Adam

Stocks

European stocks started the trading week in negative territory as concerns over artificial intelligence and volatility in precious metals haunted global markets.

The pan-European Stoxx 600 pared losses from this morning to trade just below the flatline, with sectors in mixed territory. Mining stocks led the losses. Europe’s basic resources index slumped 3.3% after the open — its biggest daily drop in nearly 10 months. It was last trading 1.5% lower. Mining stocks Glencore and Anglo American shed 1.7% and 1.8% respectively.

Major bourses also pared their losses. The U.K.’s FTSE index and France’s CAC 40 were last trading just above the flatline, and Germany’s DAX was last up 0.2%.

European semiconductor stocks were also lower. Chip giant ASML was near the bottom of Stoxx 600, down 4%. Be Semiconductor and ASM International were down 4% and 3.7%, respectively.

The sharp declines in Europe on Monday come amid similar moves in global markets.

Silver, which has more than doubled over the past 12 months, plunged around 30% on Friday. That marked the metal’s worst one-day performance since 1980. Spot gold lost around 4.5% to $4,648 per ounce on Monday, and silver was last seen down 6.5% at $79 per ounce.

Asia-Pacific markets fell overnight with South Korean benchmarks leading declines, as investors monitored gold and silver prices after Friday’s sharp declines. Meanwhile, U.S. stock futures fell on Sunday night as traders kept an eye on bitcoin after a weekend sell-off.

Bitcoin on Saturday dropped below $80,000 for the first time since April, a sign investors were taking more risk off the table following Friday’s sharp declines in precious metals.

Wall Street also turned its attention to Nvidia as questions over the artificial intelligence boom loomed. Nvidia’s plans to pour $100 billion into OpenAI have stalled, with chipmaker execs expressing doubt about the deal, The Wall Street Journal reported, citing people familiar with the matter.

Earnings in Europe come from Julius Baer Group today, while German retail sales and Spanish new car sales are due data-wise.