Affected by expectations of personnel changes at the Federal Reserve and profit-taking pressure, the precious metals market experienced severe selling on Friday, with gold and silver prices significantly retreating from historical highs, ending a previously unstoppable record-setting trend. This sudden reversal indicates that after experiencing a &#34;融涨&#34; style one-sided rise, the market's sensitivity to marginal changes in monetary policy is significantly increasing.
According to Wall Street News, market news suggests that U.S. President Trump plans to nominate Kevin Warsh as the Chairman of the Federal Reserve, which has become a key catalyst triggering a reversal in market risk aversion. Due to Warsh's long-standing reputation as a hawk, investors quickly repriced the Federal Reserve's future policy path, driving the U.S. dollar index higher and U.S. Treasury yields up, directly suppressing the appeal of non-yielding precious metals.
As a result, spot gold prices plummeted 6% during the day, falling to around $5,055 per ounce, while spot silver also faced a severe decline, dropping over 13% and breaking below the $100/ounce mark.
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This significant pullback has drawn strong attention from investors: is this merely a healthy adjustment within a bull market, or does it signify a fundamental reversal in the logic of rising driven by geopolitical and fiscal uncertainties? Analysts generally believe that although long-term driving factors still exist, the short-term technical extreme overbought conditions and the hawkish shift in policy expectations are forcing the market into a period of intense volatility and consolidation.
<h2>Warsh Ignites Hawkish Expectations + Government Shutdown Eases Fiscal Concerns</h2>
The direct trigger for this market movement comes from policy signals in Washington. According to media reports, the Trump administration is preparing to nominate Kevin Warsh as the Chairman of the Federal Reserve and plans to make a formal announcement on Friday morning Eastern Time. Warsh's nomination is interpreted by the market as a reinforcement of the Federal Reserve's anti-inflation stance.
Bloomberg strategist Brendan Fagan pointed out that the assessment of the Federal Reserve under Warsh's leadership begins with his past record, which is a positive signal for the U.S. market facing rising risk premiums. Fagan believes that although Warsh's appointment does not directly imply an immediate change in monetary policy, it will substantially improve the market's perception of the Federal Reserve's independence, alleviating concerns about the central bank potentially yielding to political pressure or rationalizing inflation. This rebuilding of confidence provides strong support for the U.S. dollar, thereby directly suppressing dollar-denominated commodities.
Additionally, Ed Yardeni, president of Yardeni Research, analyzed that **as the Democrats and Republicans reached a temporary agreement to avoid a government shutdown, market concerns about the U.S. fiscal cliff have eased, which partly contributed to the sell-off
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<h2>Inevitable Correction After &#34;融涨&#34;</h2>
Before the sharp decline, the surge in gold prices was mainly driven by geopolitical tensions, economic trade uncertainties, and a weak dollar. However, the rapid increase also accumulated significant correction risks.
Yardeni analysis stated that during the previous surge from $3,000 to $5,500, gold prices hardly experienced significant corrections, resembling more of a &#34;融涨&#34; rather than a traditional bull market rhythm. Yardeni indicated that in a bull market, a price correction to $5,000 and consolidation around that level is a normal market pattern.
Regarding the structure of the decline, Gregor Gregersen, founder of precious metals trader Silver Bullion, pointed out its anomalies. He believes that if institutions were to orderly take profits, they would typically reduce positions gradually to obtain optimal prices. However, Friday's market saw a massive drop in a very short time, lacking obvious public driving factors , which suggests that this decline may not simply be profit-taking, and it cannot be ruled out that it was intentional selling pressure.
From a technical perspective, precious metals had previously entered a severely overbought area, making a correction inevitable. Manpreet Gill, Chief Investment Officer for Europe, Africa, and the Middle East at Standard Chartered Bank, noted that the bank's proprietary signals indicate that both gold and silver are in an overbought state, with a very tense short-term technical backdrop.
eToro market analyst Zavier Wong also added that the relative strength index (RSI) for gold had previously surpassed 90, far exceeding the conventional overbought warning line of 70, making prices highly susceptible to correction impacts. Gill also specifically mentioned that the gold-silver ratio recently approached an extreme low of around 31, a level that was seen in 2011 and historically often signals the arrival of a consolidation period. He expects that in this scenario, gold may experience a milder consolidation, while the more volatile silver may face greater price fluctuations.
<h2>Long-term Upward Logic Remains Intact, Is the Correction a Buying Opportunity?</h2>
Despite the short-term setback, several analysts believe that the structural factors supporting the rise of precious metals—such as geopolitical risks, fiscal uncertainties, and concerns over currency depreciation—have not disappeared.
Afdhal Rahman, Executive Director of OCBC Wealth Consulting, believes that investors have not missed trading opportunities. Although the recent rapid increase has raised short-term correction risks, the structural driving forces behind this round of increases remain intact. However, he also warned that given prices are still high (gold has risen about 20% this year, and silver over 50%), the current margin for error has significantly narrowed, and he does not recommend that investors buy in all at once; a phased accumulation strategy would be wiser.
Standard Chartered maintains a long-term bullish view on gold, recommending an overweight position in balanced investment portfolios. Gill suggests that underweight investors can use the correction opportunity to gradually build positions to target levels. For tool selection, both Gill and Heidi Sum, Global Head of Liquid Physical Assets at DWS, recommend that physically-backed ETFs are suitable for investors seeking liquidity and transparency, while physical gold is more appropriate for long-term investors focused on wealth preservation.
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The prices of precious metals have plummeted from high levels, with the direct triggers being the sudden shift in hawkish expectations from the Federal Reserve Chairman, alleviated concerns over a government shutdown, and market technical overbought conditions. Analysts generally believe that this is more likely a sharp adjustment within a bull market, as the core factors driving the long-term rise, such as geopolitical issues and currency devaluation, have not changed, and the market will enter a period of consolidation

- The precious metals market experienced significant sell-offs, with gold prices dropping dramatically from historical highs, attributed to expectations surrounding a Federal Reserve leadership change and profit-taking pressure.  
- Reports indicate that President Trump plans to nominate Kevin Warsh as the Fed Chair, heightening hawkish sentiments and impacting market perceptions regarding future monetary policy.  
- Analysts suggest that while the longer-term drivers for gold remain intact, current technical conditions signal a period of volatility and potential correction in the market.

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The sharp collapse of gold and silver at high levels, is it a temporary adjustment or the beginning of a trend reversal?