Silver Crashes 31% as Warsh Nomination Triggers Dollar Surge
Precious metals sector plunges as hawkish Fed chair pick drives dollar higher and Treasury yields rise
Silver suffered its second-worst single-day decline on record, plunging 31% as precious metals investors reacted to President Donald Trump's nomination of Kevin Warsh as the next Federal Reserve Chair. The catastrophic selloff erased much of the metal's recent rally, which had pushed prices above $120 per ounce earlier this week before collapsing below $100 following the announcement.
The broader precious metals and mining sector sustained heavy damage, with major silver producers Pan American Silver (PAAS) falling 12.6%, First Majestic Silver (AG) tumbling 15%, and Newmont (NEM) declining 10.5%. Silver exchange-traded funds were among the hardest hit, with the iShares Silver Trust (SLV) dropping 30% and the Aberdeen Standard Physical Silver Shares ETF (SIVR) sinking 33.6%. Gold prices also fell sharply, dropping below the psychologically significant $5,000-per-ounce level as the dollar index surged.
The market turbulence stems from perceptions that Warsh represents a more hawkish approach to monetary policy than his predecessor. The former Fed Governor, who served from 2006 to 2011, has historically emphasized inflation risks and advocated for tighter monetary policy. His nomination immediately strengthened the U.S. dollar and pushed long-dated Treasury yields higher, creating a challenging environment for non-yielding precious metals. A stronger dollar makes silver and gold more expensive for foreign buyers, while rising yields increase the opportunity cost of holding assets that don't generate income.
Analysts noted that the dramatic decline represented a long-overdue correction from speculative excess. Gold had climbed 17% and silver rallied approximately 40% since the beginning of January, driven by investor demand for protection against geopolitical risk and financial instability. Those gains had left the sector vulnerable to sharp profit-taking on any shift in policy expectations. Market commentators had repeatedly warned that both metals were "ripe for a correction" given their overbought technical conditions and stretched valuations.
The nomination could face Senate confirmation hurdles, with at least one Republican senator reportedly opposing the appointment until a Department of Justice investigation into current Fed Chair Jerome Powell is resolved. Powell's term as chair expires in May. However, the immediate market reaction suggests investors are positioning for a Federal Reserve under Warsh that may be less inclined to pursue aggressive interest rate cuts, a factor that had previously fueled the precious metals rally.
For the mining sector, the selloff represents a stark reversal from the optimism that had driven valuations higher throughout January. While the fundamental supply-demand dynamics for silver remain intact, the sector now faces renewed volatility as markets adjust to the prospect of a more hawkish Federal Reserve leadership. Analysts will be watching closely for signs of stabilization, though the technical damage from Friday's crash may take time to repair.