Gold Drops, Dollar Spikes After Warsh Fed Nomination

Gold prices plunged and the US dollar strengthened on Friday after Trump nominated former Federal Reserve governor Kevin Warsh to succeed Jerome Powell as chair of the US central bank, triggering sharp moves across global financial markets.

Spot gold fell 8.5 percent to $4,866.60 per ounce by 4pm ET, while silver dropped nearly 30 percent to $81.93. Other metals also recorded heavy losses, with copper, platinum and palladium trading sharply lower. At the same time, the US Dollar Index climbed 0.84 percent to 97.09, reflecting renewed demand for the greenback.

The nomination ends months of speculation over the next leader of the Federal Reserve, with Powell’s term set to expire in May. Warsh, who served as a Fed governor between 2006 and 2011, has previously been viewed as less dovish than several other potential candidates and has called for sweeping changes in how the central bank operates.

In a July interview with CNBC, Warsh called for “a new Treasury-Fed accord, like we did in 1951 after another period where we built up our nation’s debt and we were stuck with a central bank that was working at cross purposes with the Treasury.” He has also described Federal Reserve independence as “important and worthy,” while arguing the institution has weakened its case by straying from its core mandate.

Bond yields and rate expectations

US Treasury yields moved higher as traders assessed how Warsh could shape future interest rate policy if confirmed. The 10-year Treasury yield rose 1.8 basis points to 4.245 percent, while the 30-year yield climbed 2.7 basis points to 4.881 percent. The 2-year Treasury yield, which closely tracks expectations for Fed policy, slipped 2.2 basis points to 3.529 percent.

“Many investors see the appointment as leading to a steepening in the yield curve, with near-term easing helping to depress short-end rates while a shrinking balance sheet drives long-term yields higher,” said Karl Schamotta, chief market strategist at Corpay.

However, Schamotta cautioned that the market reaction may be overstated, noting that Warsh has not historically been successful in pushing major policy shifts and that the Fed’s balance sheet strategy is now focused on liquidity rather than tightening financial conditions.

Despite the market turbulence, futures pricing continues to suggest that the Federal Reserve is likely to cut interest rates twice this year, potentially bringing the federal funds rate to a target range of 3 to 3.25 percent by the end of December.

Trump’s stance on interest rates

Trump has repeatedly urged the Federal Reserve to lower borrowing costs since returning to office last year. Speaking to reporters on Friday, he said it would likely be inappropriate to ask Warsh about specific rate-cut plans, but added that the nominee supports easing monetary policy.

“For those hoping for interest rate relief from the Federal Reserve in 2026, the nomination of Kevin Warsh as the new chairman of the Fed should be extremely well received,” said Marty Green, principal at Polunsky Beitel Green, highlighting expectations that Warsh’s appointment could align with the administration’s push for lower interest rates.

The sharp sell-off in gold and the rally in the dollar underscore how sensitive global markets remain to shifts in US monetary leadership and policy direction.