Gold Plunges 7% Below $5,000 After Trump Signals Fed Chair Pick
Gold fell roughly 7% to $4,975 per ounce (intraday low $4,941.79) after a sharp U.S. dollar rebound triggered by President Trump signalling his nominee for Federal Reserve Chair, with former Fed governor Kevin Warsh reported as the leading candidate. Spot gold briefly dropped as much as 7.5%; U.S. futures also declined over 7%. The dollar’s strength made gold more expensive for overseas buyers and prompted profit-taking after a January rally that saw gold surge about 16% and a record high of $5,594.82. The sell-off extended to other precious metals: silver plunged about 25% from record highs. Analysts described the move as liquidity-driven profit-taking amid policy-uncertainty; UBS called it consolidation after a powerful rally, while some strategists warned extreme moves could mark durable peaks. Physical demand remains mixed—premiums rose in India and China—while forecasts remain varied, with some analysts still projecting 2026 averages above $5,300. Key points for traders: sharp intraday volatility, correlation with dollar and Fed leadership news, potential short-term continuation of liquidation, but underlying bullish monthly momentum remains from January’s large gains.
Bearish
The immediate market reaction — a roughly 7% drop in spot gold tied to a strong dollar after Trump signalled his Fed chair pick — points to a short-term bearish stance. Historically, gold sells off when the dollar strengthens or when policy clarity reduces safe-haven demand; similar rapid reversals occurred after earlier Fed-related headlines and rate-expectation shifts. The move was also amplified by concentrated positioning and profit-taking following a sharp January rally and record highs, increasing downside gamma and forced liquidations (notably in silver). For traders this implies elevated short-term risk: potential continuation of downside as positions unwind and liquidity-driven selling persists. However, fundamentals that drove the January rally (inflation concerns, investor demand, central-bank balance-sheet expectations) remain intact, suggesting the drop could be a consolidation rather than a trend reversal. Tactics: short-term traders may look for momentum-based short opportunities or volatility strategies (options), while swing/position traders should watch dollar strength, Fed nominee confirmation, and physical demand/premium data for signs of stabilization before re-entering long positions.