Gold and Silver Prices Drop A Lot After Fed News

Prices for gold and silver have fallen very quickly. This happened after news about who might lead the Federal Reserve came out. Many people are talking about why this happened, including market reasons and other factors.
By Newsroom | Markets, United States |

Recent market movements show a sharp decline in silver and gold prices, a significant reversal after a period of strong gains. This event has triggered widespread discussion about market forces, including geopolitical influences and potential manipulation.

Silver Price: 'Huge Overnight Attack' Alleged as Market Slumps 30 Per Cent - 1

The past two weeks have witnessed an unprecedented slump in precious metals, with silver prices experiencing a dramatic fall of up to 30% and gold also tumbling significantly from its record highs. This sudden and steep decline, described by some as a "washout" or "crash," occurred after a sustained rally, leading to substantial losses for investors and prompting a deep dive into the underlying causes. The swiftness and magnitude of the price drop have led to intense scrutiny of market dynamics and claims of intentional market disruption.

Silver Price: 'Huge Overnight Attack' Alleged as Market Slumps 30 Per Cent - 2

Key Events and Market Behavior

The precipitous drop in silver and gold prices appears to be linked to a confluence of factors, notably the nomination of Kevin Warsh as the next Chair of the Federal Reserve by President Donald Trump, coupled with technical market signals.

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Silver Price: 'Huge Overnight Attack' Alleged as Market Slumps 30 Per Cent - 3

  • Federal Reserve Nomination: The announcement of Kevin Warsh as the nominee for Fed Chair on Friday January 30th, 2026, is widely cited as a primary trigger. Warsh is known for advocating for central bank independence. This nomination was perceived to ease concerns about the Fed's autonomy in setting policy, leading to a stronger U.S. dollar and a weakening of precious metals.

  • Market Rally and Technical Indicators: Both gold and silver had been on a significant rally over the preceding months. This ascent, driven by factors like a weakening U.S. dollar, geopolitical tensions, and concerns about the Fed's independence, had pushed prices to record highs. However, this rally also led to metals markets being in an "overbought territory," with technical indicators like the Relative Strength Index (RSI) flashing warning signs. Some analysts believe this positioning made the markets susceptible to a sharp correction.

  • Dollar Strength: Following Warsh's nomination, the U.S. dollar index rose back above the 97 mark. Historically, a stronger dollar tends to put downward pressure on gold and silver prices, as they are often priced in U.S. currency and become more expensive for holders of other currencies.

  • Investor Sentiment and Profit-Taking: The prolonged rally may have encouraged investors to book profits, especially after reaching all-time highs. The sharp price reversal likely triggered stop-loss orders, exacerbating the downward momentum.

Contributing Factors to the Decline

Several elements converged to create the conditions for such a drastic market downturn. The interplay between fundamental economic signals and technical market conditions played a crucial role.

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Silver Price: 'Huge Overnight Attack' Alleged as Market Slumps 30 Per Cent - 4

  • Geopolitical and Economic Uncertainty: Prior to the recent plunge, market volatility, geopolitical tensions, and concerns about the Federal Reserve's independence had fueled a rally in precious metals, seen as safe-haven assets. The easing of some of these immediate concerns, particularly regarding Fed independence with the Warsh nomination, removed a key support for metal prices.

  • Leverage and Speculation: Reports indicate that significant leverage was built up in the silver market during the rally. When prices began to fall, leveraged positions likely faced margin calls, forcing liquidation and amplifying the sell-off. This "liquidity wipeout" in leveraged trades contributed to the dramatic intraday price swings.

  • Dual Nature of Silver: Silver's price movements are influenced by both its role as a safe-haven asset (like gold) and its industrial demand. While gold's structural bull case is seen as intact by some, silver's greater volatility and its dual nature might have made it more susceptible to a sharper correction.

  • Potential Supply Increases: Some market observers have noted signals that suggest a potential increase in new silver supply. Factors such as record amounts of silver reserves that could be mined and backlogs at refineries could also exert downward pressure on prices if supply dynamics shift.

Market Perspectives and Expert Views

Opinions on the underlying causes and future trajectory of gold and silver prices remain divided, with some suggesting deeper systemic issues at play.

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  • Official Explanations: The mainstream narrative points to the Kevin Warsh nomination, a stronger dollar, and the unwinding of speculative positions as the primary drivers of the price crash. This perspective emphasizes the immediate market reaction to policy signals and technical overbought conditions.

  • Allegations of Manipulation: Some commentary has raised questions about the possibility of market manipulation, particularly given the speed and scale of the price drop. The notion of a "huge overnight attack" has been suggested, with some pointing to a high paper-to-physical ratio in silver contracts as a potential indicator of systemic vulnerabilities that could be exploited.

  • Divergent Outlooks: While some investors see the current price drop as a temporary correction within a larger bull market for gold, others view silver as being more vulnerable to further declines. The extent to which leveraged positions are "flushed out" and whether new long-term buyers will step in at lower prices remain key uncertainties.

Evidence and Data Points

Several pieces of data and market observations support the analysis of the recent price action.

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  • Price Declines:

  • Silver experienced a drop of up to 30%.

  • Gold also saw a significant fall, with some reports detailing an 8% crash.

  • The declines were the worst single-day drops since 1980 for silver and marked a sharp reversal from all-time highs.

  • U.S. Dollar Strength: The U.S. Dollar Index moved back above 97, indicating increased strength against other major currencies.

  • Gold-to-Silver Ratio: The spot gold-to-silver ratio widened significantly, moving from the mid-40s to 57 ounces of silver needed to buy one ounce of gold.

  • Technical Indicators: The Relative Strength Index (RSI) for both gold and silver had reached very high levels (e.g., above 80 for silver, and 90 for gold), indicating oversold conditions prior to the sharp sell-off.

  • Leveraged Exposure: Silver-linked exchange-traded funds (ETFs) in the U.S. saw magnified losses, suggesting significant leveraged exposure was caught in the downturn.

Analysis of Conflicting Viewpoints

The dramatic market event has brought to the fore differing interpretations of its causes and implications.

The Warsh Nomination as the Primary Catalyst

  • Argument: The nomination of Kevin Warsh as the next Federal Reserve Chair provided a clear catalyst. Warsh's known stance on central bank independence was interpreted as a signal that the Fed would likely pursue more orthodox monetary policies, including potentially raising interest rates sooner rather than later. This prospect typically strengthens the U.S. dollar and reduces the appeal of non-yielding assets like gold and silver.

  • Evidence: Multiple reports highlight the immediate correlation between the Warsh announcement and the subsequent market reaction, including the strengthening dollar and the plunge in precious metals prices. This view suggests that market fears regarding Fed policy direction were alleviated, leading to a repricing of assets.

Technical Overextension and Market Overheat

  • Argument: The preceding rally had pushed gold and silver into significantly overbought territory, making them ripe for a correction regardless of external catalysts. High leverage in the silver market further amplified this vulnerability. The sharp drop, in this view, was an inevitable unwinding of unsustainable price levels.

  • Evidence: The extremely high RSI readings for both metals prior to the crash, alongside mentions of "liquidity wipeout" and the flushing out of leverage, support the idea that the market was technically overheated. The fact that silver fell more sharply than gold could be attributed to higher speculative leverage in its market.

Claims of Market Manipulation

  • Argument: The sheer speed and magnitude of the price collapse, occurring "in minutes" and wiping out trillions of dollars, has led some to suggest deliberate manipulation. This perspective posits that entities with significant market influence may have orchestrated the downturn to profit from it. The high paper-to-physical ratio in silver contracts is sometimes cited as a potential mechanism for such manipulation.

  • Evidence: While direct proof of manipulation is elusive in market reports, the "huge overnight attack" narrative and questions about whether the price drop was a "paper reset" are present in some analyses. The rapid liquidation of leveraged positions could be seen as both a natural market process and a potential avenue for engineered disruption.

Conclusion and Future Implications

The recent precipitous decline in silver and gold prices represents a significant market event, underscoring the volatility inherent in precious metals trading. The Kevin Warsh nomination appears to have acted as a trigger, revealing underlying technical weaknesses and speculative excesses within the market.

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  • Immediate Impact: The sharp price reversal has likely led to substantial financial losses for many investors, particularly those who were heavily leveraged or entered positions near the market peak. The narrative of a "predictable bust" following a "parabolic rise" in silver has gained traction.

  • Market Dynamics: The event highlights the strong historical correlation between the U.S. dollar and precious metal prices, as well as the impact of Federal Reserve policy expectations. It also underscores the amplified risk associated with high leverage in trading.

  • Future Outlook: While gold's "structural bull case" may remain intact for long-term investors, silver's immediate future appears more uncertain, with potential for further volatility. The market is now in a state of flux, with buyers exercising caution. Whether this represents a mere correction or the end of a sustained rally is a question that market participants will continue to monitor closely. The extent to which underlying supply-demand fundamentals and investor sentiment evolve will determine the subsequent trajectory of prices.

Sources Used:

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Frequently Asked Questions

Q: Why did gold and silver prices fall so much?
Prices dropped because of news about the person chosen to lead the Federal Reserve. Also, the market was in a position where a price drop was likely.
Q: What was the news about the Federal Reserve?
The President chose someone named Kevin Warsh to lead the Federal Reserve. This news made the U.S. dollar stronger, which often makes gold and silver prices go down.
Q: Was the market already set up for prices to fall?
Yes, gold and silver prices had gone up a lot before this. This made the market ready for a price drop, like a balloon that is too full.
Q: Did anything else cause the prices to fall?
Some people think that big traders might have caused the prices to fall quickly on purpose. Also, when prices started to fall, people who had borrowed money to buy metals had to sell them, making the drop bigger.