Gold and silver lose their shine as Trump prepares to choose new Federal Reserve chair

Gold and silver have retreated from record highs while the dollar rallied as markets await the appointment of a new Federal Reserve chair.

There is growing speculation that the President will appoint former Fed governor Kevin Warsh.

The appointment of a more hawkish chair, which is expected today, will be a relief to investors following current chair Jerome Powell’s clash with Trump over interest rates.

The dollar climbed in response, but cautious investors who have flocked to gold in recent months pulled back.

The retreat in precious metals prices has taken the shine of the FTSE 100 which opened flat as miners come under pressure.

Endeavour Mining tumbled 8 per cent while Fresnillo and Antofagasta both fell around 7 per cent.

Trump is expected to pick former Fed governor Kevin Warsh as the new Federal Reserve chair

New Fed chair strengthens the dollar

The S&P 500 closed down yesterday after a mixed day for big tech stocks. Meta added 10 per cent while Microsoft fell 10 per cent amid differing approaches to AI spend.

While AI has become the dominant narrative for US stocks, there are signs of instability ahead. 

Microsoft reported weaker cloud revenue growth, while Apple has been behind other major tech giants in investing in the technology.

‘As rapid advancements evolve elsewhere, Apple does not want to be left behind,’ said Wealth Club’s Susannah Streeter, ‘which is why it’s collecting partners to help it deliver AI services, like Google and OpenAI and its latest acquisition – Q.AI.’

Amid geopolitical tensions, the appointment of Kevin Warsh as the Fed chair might pale in comparison, but US futures are falling in response.

The former Fed governor has a reputation as a hawk, but ‘he’s recently been publicly advocating for a fresh cut in interest rates, aligned with Trump’s thinking,’ said Streeter. ‘However, his experience and past attitude imply he’s likely to hold the line if sharp inflationary pressures return.’

Neil Wilson, Saxo’s UK investor strategist added: ‘His appointment should be a net positive for the US dollar and reduce the chances of another big drop. 

‘That said, his belief that AI and deregulation will lower inflation combined with a push for a smaller balance sheet could push up long-term yields.’

The dollar has suffered sharp falls following Trump’s Greenland plans and associated tariffs, but a new Fed chair, and the possibility that a government shutdown could be averted, have lifted it.

The dollar index, which tracks the currency against six peers, is up 0.37 per cent to 96.48.

‘The move away from the dollar ‘debasement’ trade, which was previously showing signs of becoming entrenched, was something of a surprise to investors who- have been actively seeking haven alternatives,’ said Richard Hunter, head of markets at interactive investor.

Gold and silver lose their shine

Wilson says the news of Warsh’s appointment to the Fed is also stoking moves in the metals ‘which has already entered an incredibly volatile phase’.

‘Markets [are] assessing that a more conventional candidate who’s not a complete Trump stooge is negative for the speculative gold rampup.’

Commodity markets have been on a wild ride this week, with gold, silver and copper all hitting record highs before cratering on Thursday.

Gold neared $5,600 an ounce before tumbling 8 per cent in a few minutes to a low of $5,023. Prices stabilised and moved above $5,300 before crashing to $4,939 in early trading. It has climbed to $5,129 this morning.

The volatility was more pronounced in silver, which fell 12 per cent from $121.67 to $106.67 on Thursday, and is now down to $104, after briefly dipping below $99.

Copper, which surged 10 per cent to a new high yesterday, is down 3 per cent.

‘It had hallmarks of a technical selloff rather than a fundamental change. 

‘We’re seeing extreme volatility in metals and FX markets which is leading to serious dislocations and may well gnaw away at equity market sentiment,’ said Wilson.

‘It may be the start of a more sober assessment by market participants about the reasons or being bullish on gold, silver. Long term fundamentals remain unchanged but the over-exuberance may be over.’

Elsewhere, Goldman Sachs has previously forecast copper prices to decline to $11,000 per tonne by the end of the year, following a decision on tariffs.

‘Buyers have been stockpiling copper in the US in advance of the expected import tax, creating expectations of temporary scarcity outside of the US,’ said analyst Eoin Dinsmore. ‘We do not expect the price above $13,000 to be sustained.’

Oil prices are also a little lower, with brent crude down 1.16 per cent, after hitting a six-month high this week.