On Friday, gold experienced its largest drop in 40 years, while silver recorded the largest intraday drop in history.
Among them, spot gold prices once fell more than 12%, hitting a low of $4682, the largest single-day drop since the early 1980s. By the close, spot gold was down 9.25% at $4880.
Spot silver once plunged more than 36%, marking the largest intraday drop in history, reaching a low of $74.28. By the close, spot silver was down 26.42% at $85.259.
The main culprit behind this epic crash is Trump's nomination of Kevin Walsh as the new chairman of the Federal Reserve.
Why would Trump's nomination of Kevin Walsh lead to a sharp drop in gold and silver prices?
An important logic behind the rise in gold over the past two months is the depreciation of the dollar, with global funds turning to buy and hold alternative assets like gold and silver.
Behind the depreciation of the dollar, one important logic is the conflict between Trump and the Federal Reserve.
Trump previously insisted on significant and rapid interest rate cuts from the Federal Reserve to support the rise of the U.S. economy, continuously criticizing current Federal Reserve Chair Powell for being incompetent.
According to Trump's logic, a candidate for Federal Reserve Chair who supports radical interest rate cuts must be nominated!
Thus, the hot candidates speculated by the media were basically Kevin Hassett, Christopher Waller, Rick Reed, and other dove-leaning candidates.
Especially for the early frontrunner, Kevin Hassett, whose stance belongs to the radical dove faction, advocating for rapid and large interest rate cuts, which aligns closely with the White House's position.
That person is basically Trump's shadow.
Thus, the market logic is naturally to bet that the dollar will continue to depreciate sharply, pushing funds to continuously switch to buying and holding gold and silver.
Who would have thought that Trump would TACO at the last moment and back down once again!
He ultimately chose a hawkish candidate, Kevin Walsh, as the next Federal Reserve Chair!
Who is Kevin Walsh?
He is a former Federal Reserve Governor (2006-2011), a researcher at the Hoover Institution at Stanford, with a Wall Street background.
He is regarded as a defender of central bank independence, long a hawk, opposing quantitative easing and advocating for balance sheet reduction to control inflation, precisely the type of person Trump should hate.
How hawkish is Kevin Walsh?
First, he strongly opposes inflation and wants to strictly control it.
In 2025, during an interview at the Hoover Institution, he said:
"Inflation is not an unexpected result of Putin or the supply chain, but a 'choice' of the Federal Reserve.
The central bank has the full capability to determine price levels by controlling the currency.
Second, he opposes excessive easing and even once protested by resigning.
At a meeting earlier this year, he said:
"I resigned in 2011 because the second round of quantitative easing deviated from the core responsibilities of the central bank, and long-term QE would distort the market and foster bubbles."
At that time, the Federal Reserve was brewing QE2, and Kevin Walsh resigned 7 years early in strong opposition to the second round of quantitative easing and the expansion of the balance sheet, expressing a strong protest against the policy.
Third, he insists that balance sheet reduction should be prioritized.
At a meeting earlier this year, he stated:
"The balance sheet should be reduced to below $5 trillion, first reduce the balance sheet and then cut rates, using balance sheet reduction to control inflation to create space for rate cuts; the pace should be cautious."
Fourth, his attitude towards central bank independence is very clear.
He has stated multiple times in interviews:
"The independence of the Federal Reserve is a 'conditional contract', requiring stricter accountability, but the White House cannot overly intervene in monetary policy."
"The Federal Reserve should divest from non-core issues like climate and cultural inclusivity, returning to its legal responsibilities for price stability and financial stability to prevent political erosion of independence."
"Central bank independence is not to confront the White House but to stabilize the dollar and lower inflation expectations; this is the cornerstone of market trust."
…………
How can a hawkish figure who advocates for central bank independence, opposes inflation and easing, and insists on prioritizing balance sheet reduction laugh to the end and gain Trump's support?
Junlin believes that three main logics are at play.
First, Kevin Walsh's background is very strong.
Kevin Walsh has experience in politics, business, and academia, with recognized professional capabilities, especially having tremendous influence on Wall Street.
In academia, his early educational background is solid: Bachelor's in Public Policy from Stanford (Friedman's assistant) → Doctor of Law from Harvard → Financial studies at MIT/Harvard Business School, with a prominent composite background.
After graduation, he served as a scholar at the Hoover Institution and has long published critiques of the Federal Reserve's balance sheet expansion and excessive regulation, wielding significant influence.
In the business world, he worked for Morgan Stanley's M&A department from 1995 to 2002, rising to Executive Director in 7 years, accumulating investment banking and trading experience.
He has also served as a partner at Druckenmiller, with a long career, thus being seen as an "insider" on Wall Street.
In politics, he served as Special Assistant to President George W. Bush on Economic Policy from 2002 to 2006 and Executive Secretary of the White House National Economic Council, getting into the core of policy.
From 2006 to 2011, he served as a Federal Reserve Governor at the age of 35, making him the youngest Federal Reserve Governor at that time.
Since then, he has straddled the worlds of politics, business, and academia, with rich experience and background, unmatched among the four candidates.
One event that greatly established his reputation in the industry was during the 2008 financial crisis, when he acted as a 'middleman' between the Federal Reserve and Wall Street, facilitating the acquisition of Bear Stearns by JPMorgan.
In contrast, he strongly opposed the bailout of Lehman internally, saying, "I hope we do not protect anything," believing in avoiding moral hazard.
What to oppose and what to support, he has a clear gauge in his mind, with professional capabilities recognized across the three realms.
Second, Kevin Walsh's recent attitude has become more flexible.
Although Walsh is a hawk, he is not an inflexible old man.
He is tough in hard situations and subtly softens where he can.
Walsh is originally a Republican, and on certain views, he shares common ground with Trump.
For example, he has always advocated for financial deregulation and increasing tariffs.
He has written in a column for the Wall Street Journal: "(The Dodd-Frank Act) raises compliance costs for banks, squeezing credit for small and medium-sized enterprises, and should be deregulated to unleash financial vitality."
He has stated in a speech: "Retail central bank digital currency will erode privacy and expand government intervention; it should not be launched."
He supports bitcoin: "Bitcoin is similar to gold, has scarcity and store of value, and is suitable as part of a diversified asset allocation."
He defended increasing tariffs: "Trump's tariff policy is unlikely to trigger inflation; rather, it can promote supply chain adjustments and domestic production."
These views are consistent with Trump's, which is why he was selected as one of the four candidates.
Of course, he has an advantage as he established a personal relationship with Trump early on.
As early as Trump's 1.0 era, he was a frequent guest at Mar-a-Lago, and in 2017, he was considered for nomination as the Federal Reserve Chair candidate, but was eliminated due to being too young and lacking qualifications at that time.
Little known is that his father-in-law Ronald Lauder is a Wharton classmate and long-time ally of Trump, and his wife Jane Lauder is an heir to Estée Lauder, further strengthening the political and social ties between the two families.
Starting in 2025, he served as Trump's economic advisor, deeply involved in policy-making, ultimately becoming one of Trump's trusted "insiders."
Since last year, he has continuously echoed Trump's criticism of Powell, aligning fully with Trump on interest rate cuts and Federal Reserve reform, viewed as a key "loyalty oath."
In a recent media interview, he openly stated:
"The president's frustration with Powell and the Federal Reserve is justified; long-term easing and balance sheet expansion have harmed the Federal Reserve's credibility."
"I am not turning dove, but rather supporting interest rate cuts based on the current economic and inflation situation, while adhering to controlling inflation and prioritizing balance sheet reduction. This is pragmatic, not a compromise."
Third, Trump has no other choices now.
Who Trump chooses is not entirely at his discretion; he must consider the opinions of the Senate and the market, as they can block his advancement if they disagree.
Among the four candidates—
Reed, due to lack of experience in government and central banking, faces skepticism about his independence, and is likely to be the first to be eliminated in the Senate.
Waller is dove-leaning but does not align with Trump's radical interest rate cut pace and lacks advantages, quickly becoming marginalized.
The rest is the competition between the two hot candidates, Walsh and Hassett.
Both individuals have qualifications and are trusted by Trump.
But the views are completely opposite, one is a hawk, the other a radical dove.
Initially, the market chose to bet on Hassett, leading to a rare epic spectacle of dollar depreciation and consecutive surges in gold and silver prices over the past few decades.
It is estimated that this sustained selling of the dollar has panicked Wall Street, leading to quiet pressure on Trump.
Trump is a person with a changeable attitude; if he sees something is wrong, he quickly TACO.
This has occurred multiple times in the past year, such as in the tariff war and the Greenland land grab.
If there is an advantage, he will take it; if the situation looks bad, he quickly withdraws to a safe zone.
This is just Trump's character!
Therefore, in the extreme trading conditions of gold and the dollar, Trump quickly saw the risks and knew he couldn't be tough.
On January 29, the White House held a closed-door meeting.
January 30, Hassett hinted at staying on the White House Economic Council, actively withdrawing.
Thus, the market quickly guessed the outcome, and Walsh would be nominated without a doubt.
Subsequent expectations quickly reversed—
Walsh opposes quantitative easing, advocates for rapid balance sheet reduction to control inflation, and although he has recently supported interest rate cuts, the market believes his pace in cutting rates is more cautious, likely initiating balance sheet reduction (targeting to reduce the balance sheet from $6.6 trillion to below $5 trillion), ending the previous pricing logic dominated by doves and radical rate cuts.
Moreover, Walsh is seen as a defender of central bank independence, easing the market's concerns about dollar depreciation and promoting a rebound in the dollar index.
As a result, the dollar surged sharply, while gold and silver were heavily sold off, marking the largest record of unilateral selling of gold and silver in nearly half a century.
A massacre in the precious metals market, the most brutal in history, has begun!
Reprinted from the public account Junlin Wealth
