Reports that the Trump administration plans to nominate Kevin Warsh for Federal Reserve Chairman boosted the U.S. dollar, triggering a sharp decline in gold, although the metal is still on track for its best monthly performance since the 1980s. Gold tumbled as much as 4.8% on Friday, having initially traded higher in the morning session, continuing the volatile swings that began on Thursday, interrupting its record-breaking rally. The U.S. dollar index rose as much as 0.5%, increasing the cost of the precious metal for most buyers, while silver plunged dramatically by 9.4%.

U.S. President Donald Trump is expected to nominate Warsh for the position of Fed Chair. The former Federal Reserve governor is known as an inflation hawk but has publicly advocated for interest rate cuts in recent months, aligning his stance with the President's. Trump stated he would announce the nominee on Friday morning U.S. time. OCBC strategist Christopher Wong noted that gold's movement validates the warning that what goes up sharply must come down. He pointed out that while reports of Warsh's nomination acted as a catalyst, gold was already at a point ripe for a correction; this merely provided one of the long-awaited excuses the market needed to end the previous parabolic rally. Despite this pullback, gold's gains for January remain around 19%, poised to record the largest monthly increase since 1982. Silver's performance is even more remarkable, having surged 48% year-to-date. The Trump administration's disruptive actions towards the global order have been a primary driver for the rise in precious metals, including the seizure of a Venezuelan state leader, threats to annex Greenland, and tariff threats against allies. More recently, Trump warned of potential strikes against Iran and declared tariffs on all countries supplying oil to Cuba. Renewed administration criticism of the Federal Reserve has reignited market concerns about the central bank's independence, weighing on the dollar and fueling currency debasement trades. Investors, wary of fiscal issues, are avoiding various currencies and sovereign bonds. A crash in the Japanese government bond market has further intensified these concerns, and combined with insufficient market liquidity, has propelled a stunning rally in precious metals. Concurrently, Trump reached a preliminary agreement with Senate Democrats, averting the risk of another U.S. government shutdown. The White House continues to negotiate with Democrats over new restrictions on immigration raids, which have previously sparked nationwide controversy. As of 4:13 PM Singapore time, gold was down 4.3% at $5,146.58 per ounce; silver was down sharply by 8.5% at $105.8566 per ounce; the Bloomberg Dollar Spot Index was up 0.2% but still down 1% for the week; platinum and palladium also experienced significant declines.