The global financial markets experienced significant turbulence following the formal nomination of former Federal Reserve Governor Kevin Warsh by U.S. President Donald Trump as the next Fed Chair on January 30. Although the appointment still requires approval from the U.S. Senate, the announcement immediately triggered sharp movements across asset classes.

Market participants interpreted Warsh’s historical policy stance as hawkish, which diminished gold's appeal. In response, gold and silver prices tumbled, while the U.S. dollar strengthened. In early trading hours on January 31, spot silver prices plunged by as much as 36%, marking the largest intraday decline on record. Spot gold fell over 12%, briefly dipping below $4,700 per ounce and recording its worst single-day drop in four decades.

Kevin Warsh, born in 1970, is the youngest among the leading candidates for the Fed Chair position. His career spans Wall Street, the White House, and the Federal Reserve. He holds a BA from Stanford University and a JD from Harvard Law School, and previously worked as a research assistant to economist Milton Friedman. From 1995 to 2002, Warsh gained substantial financial industry experience at Morgan Stanley. He later served as Special Assistant to the President for Economic Policy and Executive Secretary of the National Economic Council under the George W. Bush administration. In 2006, at age 35, he became the youngest-ever Fed Governor. He resigned in 2011, reportedly due to his opposition to excessive quantitative easing.

Warsh’s personal connections may have also played a role in his nomination. His wife, Jane Lauder, is an heir to the Estée Lauder fortune, and his father-in-law, Ronald Lauder, is a long-time friend of President Trump.

Despite the nomination, Warsh’s confirmation is not guaranteed. The Senate must still hold hearings and a vote. Some Republican senators have expressed reservations, particularly in light of an ongoing Justice Department investigation into current Chair Jerome Powell.

Warsh’s policy stance appears to be a balancing act. Historically viewed as a hawk, he has recently expressed support for interest rate cuts, aligning more closely with the Trump administration's preferences. However, he has also emphasized the need to reduce the Fed’s balance sheet as a means to control inflation and create room for lower nominal rates. He advocates for a “revival” rather than a “revolution” at the Fed, suggesting moderate reforms within the institution’s traditional framework.

The sharp sell-off in precious metals reflects the market’s reassessment of the future path of U.S. monetary policy. A hawkish chair who prioritizes balance sheet reduction could strengthen the dollar and reduce the attractiveness of non-yielding assets like gold.

It remains unclear how Warsh’s nomination will influence short-term interest rate expectations. The Fed has recently held rates steady after three cuts in 2025, bringing the benchmark rate to a range of 3.50% to 3.75%. Market watchers currently anticipate the next rate cut could occur as early as the June 16–17 policy meeting, by which time Warsh is expected to be in office.

Analysts suggest that under Powell’s remaining tenure, the Fed is likely to maintain a pause on rate cuts to preserve its independence amid political pressure. Once a new chair takes over after May, and as midterm election dynamics unfold, the Fed may resume its easing cycle, with two additional rate cuts possible within the year.

Warsh’s reputation as a rule-oriented policymaker stems from his tenure during the global financial crisis and the early phases of quantitative easing. He frequently voiced concerns about inflation risks and the expansion of the Fed’s balance sheet. His aversion to excessive monetary easing suggests that his primary focus as chair would be on quantitative tightening. Even if interest rates decline gradually, a reduction in dollar liquidity could still support the currency.

Some research teams note that while Warsh is perceived as the most hawkish among candidates, market volatility may persist until his policy intentions become clearer.