Gold, silver crash in $US15 trillion wipe-out after Trump appoints new head of the Fed

Gold and silver prices plunged overnight after US President Donald Trump announced his nomination for the US Federal Reserve.

In the latest market rout, more than $US15 trillion ($AU21 trillion) was wiped from the gold and silver price over 24 hours.

This is half the size of the entire US economy.

Spot silver prices fell by as much as 30 per cent to $US80.55 (AU$115.62) before recovering briefly throughout the US trading day.

The plunge in silver prices was the biggest fall one day fall since March 20, 1980.

“This is getting crazy,” Miller Tabak equity strategist Matt Maley told CNBC.

“Most of this is probably ‘forced selling.’

“This has been the hottest asset for day traders and other short-term traders recently, so there has been some leverage built up in silver.

“With the huge decline today, the margin calls went out.”

A margin call happens when an investor borrows money to buy an asset – in this case silver – and the price falls so much that the broker demands an immediate deposit of more cash or sell assets to cover the loan.

Spot gold prices plunged around 11 per cent to $US4812 (AU$6906) an ounce.

Capital.com senior market analyst Daniela Hathorn labelled Saturday morning’s price drop as “overdue” following a strong run up.

“Gold and silver had been trading in an increasingly speculative environment, with gold up nearly 20 per cent and silver more than 30 per cent over the past 10 days,” she said.

“Against that backdrop, the near-10 per cent pullback in gold overnight, while sharp, looks consistent with a long-overdue correction after a period of uninterrupted upside.”

The price of gold is falling following a strong run for the commodity when it set two historic records throughout the week.

The price of the precious metal rallied to a new record high briefly touching $US5602 (AU$7901), before sliding back to $US5,542 an ounce.

Gold’s rally continues to defy market expectations, having recently only passed the $US5000 ($AU7219) an ounce mark on Tuesday.

Gold started 2025 worth $US2600 an ounce, but investors have piled into the safe haven asset over the past 13 months sending the price more than 90 per cent higher prior to Saturday’s falls.

Why did the price of gold fall?

The plunge was initially triggered after Mr Trump announced his nomination for the Federal Reserve chair Kevin Warsh to replace Jerome Powell.

Markets continued to sell-off following the nomination, which experts called profit taking after the previous run higher.

Ms Hathorn said the longer term fundamentals of the safe haven assets had not changed.

“(The precious metals) continue to benefit from central bank buying and their role as hedges against political and fiscal uncertainty,” she said.

“Rather, it reflects some concern that prices had moved too far, too fast, without a meaningful test of momentum.”

Also weighing on the commodities market was a strengthening US dollar which makes it more expensive for overseas buyers, including from Australia, to purchase the asset.

Australia’s dollar fell back below 70 US cents overnight.

Saturday’s falls follow a near $6 trillion plunge on Friday on speculation Mr Trump was happy to see the world’s reserve currency weaken, despite the potential risk it could lead to higher inflation.

Gold declined more than five per cent and silver plunged more than eight per cent, while copper and nickel prices also fell, as traders reassessed the market.

“The parabolic rally had to come to an end” as commodity prices had “gone up too far, too quickly”, Kathleen Brooks, research director at XTB trading group, told AFP.

Bitcoin prices have also been under pressure, falling below $US88,000 ($AU126,390).