Warsh nomination shakes markets as metals plunge
Trump taps former Fed governor to replace Powell, triggering volatile session as Senate confirmation looms
President Donald Trump has nominated former Federal Reserve governor Kevin Warsh to succeed Jerome Powell as central bank chair, a surprise move that triggered a sharp selloff in precious metals and introduced fresh uncertainty into financial markets.
The nomination, announced Thursday, ends months of speculation about who would lead the Fed through what economists anticipate as a critical period for monetary policy. Warsh, who served on the Fed's board of governors from 2006 to 2011 and previously advised President George W. Bush, brings a complex policy profile that combines historically hawkish views on the central bank's balance sheet with a recent pivot toward advocating lower interest rates.
Gold and silver prices plunged more than 7% following the announcement, as investors struggled to interpret what a Warsh-led Fed would mean for inflation and growth. According to MarketWatch analysis, the metals market suffered a roughly $7 trillion valuation wipeout, marking one of the most dramatic single-day reversals in recent years.
Warsh's nomination presents investors with a stark departure from the Powell era. While historically critical of the Fed's expanded balance sheet and quantitative easing programs—positions typically associated with monetary hawks—he has more recently aligned himself with the Trump administration's push for lower interest rates. Invesco analysts note that Warsh believes anticipated productivity gains could stimulate economic growth without triggering inflation, creating room for rate cuts.
"Kevin Warsh has strong ties to the Republican Party and his policy views, which align with prioritizing investment, productivity, and private-sector credit creation, are seen as congruent with the Trump administration's agenda," according to Washington Post reporting.
However, the path to confirmation faces significant hurdles in the Senate. Senator Thom Tillis, a Republican member of the Senate Banking Committee, has publicly stated his intention to block any Federal Reserve nominee until a federal investigation into the central bank's building renovation is resolved. With Republicans holding a 13-11 majority on the committee, Tillis's opposition could complicate Warsh's path to confirmation.
Democrats have voiced their own concerns about Warsh's independence. Senator Elizabeth Warren questioned his capacity to lead the Fed without political influence, suggesting he "apparently passed the loyalty test" and urging colleagues to oppose his confirmation. Some central bank insiders have also criticized Warsh's past statements about the Fed and described his proposals to radically shrink the balance sheet as potentially disruptive.
If confirmed, Warsh's term would begin in May 2026, potentially marking a significant shift in the Fed's approach to monetary policy. His consistent advocacy for a smaller balance sheet—achieved by allowing Treasuries to mature without reinvestment—would represent a departure from the gradual normalization pursued under Powell. However, his recent dovish turn on rates suggests he may prioritize supporting growth even as the balance sheet contracts.
Market participants will be watching the confirmation process closely for signals about Warsh's likely approach to the dual mandate of maximum employment and price stability. Until then, the metals markets' dramatic reaction underscores how much uncertainty the nomination has introduced into the economic outlook.