Sharp fall in precious metals linked to US Fed leadership change and stronger dollar
A sudden and steep decline in gold and silver prices has caused massive losses for investors worldwide. In just two trading sessions—January 30 and February 1—market value worth nearly $5 trillion (over ₹450 lakh crore) was erased from global precious metals investments. The dramatic fall has shaken financial markets and raised concerns among both retail and institutional investors.
For weeks, gold and silver had been rallying strongly, delivering handsome returns. However, the momentum reversed abruptly, leaving many investors stunned. According to market analysts, the biggest trigger behind this crash is the recent decision by US President Donald Trump to appoint a new Chairman of the Federal Reserve.
Stricter Monetary Policy Signals Pressure on Metals
Experts believe that the appointment of Kevin Warsh as the new Federal Reserve Chairman has changed market expectations. Warsh is widely viewed as a strong supporter of tighter monetary policies. This has led to speculation that interest rates in the United States may remain higher for longer or rise further.
As a result, the US dollar has strengthened significantly. A stronger dollar typically puts pressure on commodities such as gold and silver because they are priced in dollars globally. When the dollar gains value, precious metals become more expensive for buyers using other currencies, reducing demand and pushing prices lower.
Gold Slides Nearly 19% in Two Sessions
Gold suffered one of its sharpest short-term declines in recent years. Over just two days, prices fell by nearly 18–19 percent, dealing a heavy blow to investors who had entered the market at higher levels. Gold Exchange Traded Funds (ETFs) also witnessed sharp declines, reflecting panic selling and profit booking.
Despite the steep correction, market experts advise investors not to panic. Many analysts still believe that gold’s long-term outlook remains positive, especially considering global economic uncertainty and geopolitical risks.
Profit Booking After Record Highs
Nikunj Sarraf, CEO of Choice Wealth, stated that the correction was not entirely unexpected. According to him, gold prices had touched record highs on January 29, and profit booking was bound to occur.
He explained, “Once the new Federal Reserve Chairman was announced, markets started factoring in the possibility of tighter US monetary policy. This strengthened the dollar and negatively impacted metal prices. Investors should avoid making emotional decisions during such volatility.”
What Should Investors Do Now?
Financial experts recommend maintaining discipline and focusing on asset allocation rather than reacting impulsively to short-term price movements. They suggest that gold should form about 5–10 percent of an investor’s overall portfolio for diversification.
Investors whose portfolios currently have less than this percentage in gold can consider using the current dip as a buying opportunity. Gold continues to be viewed as a hedge against inflation and economic instability over the long term.
Silver Faces Even Sharper Decline
Silver prices have fallen even more steeply than gold, raising comparisons with historic crashes seen in past decades. This has amplified fears in the commodities market and caused sharp declines in silver-based ETFs as well.
However, analysts stress that volatility is a natural part of commodity cycles and that long-term investors should avoid panic selling.
Conclusion
The sudden crash in gold and silver prices has resulted in one of the largest wealth erosions in recent history. While short-term losses are significant, experts continue to advise patience and strategic investing. With global economic uncertainty still present, precious metals may regain strength over time.
For now, investors are urged to stay informed, manage risk carefully, and stick to long-term financial goals rather than reacting to short-term market shocks.
