The steady march higher for precious metal prices has finally faltered, with both gold and silver dropping over the course of the weekend. At the time of writing, gold is down to $4,700 per troy ounce, having sat comfortably above $5,000 for the latter part of January. Silver is also down to $80 per troy ounce, similarly dropping on Thursday when news that Kevin Warsh would receive the nomination for Fed chairman firmed up. The price of precious metals, seen as an asset of safe haven, had pushed steadily higher over the past year in response to economic volatility. But Warsh, already a former Fed governor with a dovish stance on short-term monetary policy, but hawkish on the Fed’s balance sheet, triggered a change in sentiment last week.
Much of the excitement around gold and silver had boiled down to an argument for portfolio diversification outside of the usual portfolio norms (i.e., bonds or cash), driven by fears about institutional factors such as the value of the U.S. dollar, central bank independence, and the level of national debt.
Warsh answers two of those questions. He is seen by markets as being not too closely linked to the Trump administration, as well as being an individual who wants a tighter quantitative stance—making the Fed less of a backstop for government borrowing.
