Markets’ Reaction to Warsh: Silver Collapses, Gold Plunges, Dollar Jumps, Treasuries Yawn, Stocks Drop, already Battered Cryptos Sink
by Wolf Richter • Jan 30, 2026
Pulling the rug out from under the “debasement trade.”
By Wolf Richter for WOLF STREET.
Different markets reacted differently to President Trump’s nomination of Kevin Warsh for Fed Chair. And most of them were well-behaved, as you’d expect from a Fed-chair nomination that has been discussed for months.
But what stood out was the immense mania in gold and silver that had produced massive gains in the prior months and years; it was super-ripe; traders were sitting on massive profits; prices had already been extremely volatile in recent days, indicating that they’d become stretched beyond belief, and that any little thing could be that straw that would break the camel’s back.
QE seems to be history. Warsh has long hammered on the Fed and on Powell for QE and for the massive size of the Fed’s balance sheet that he says should be much smaller. That has been a consistent theme, and he has not deviated from it.
He and Treasury Secretary Bessent – long-time friends – are singing from the same hymn sheet. Bessent published an essay in which he blasted the Fed for its QE, for its enormous balance sheet, for the “perverse incentives for irresponsibility” that it has created, for its “Wealth Effect” policies, for failure to knock down inflation when it began to surge, for the “class and generational disparities” that its monetary policies, such as QE, have created [I discussed Bessent’s essay here].
When Warsh was a governor on the Federal Reserve Board under Bernanke, he supported QE-1 in order the get the Financial Crisis under control.
But when that was done, and the dust had settled and the economy had begun to recover, and markets were roaring higher in 2010, Bernanke nevertheless was pushing for QE-2, amid substantial opposition from some members on the FOMC, including Warsh and Thomas Hoenig. Bernanke announced QE-2 in November 2010, and Warsh quit in March 2011 (and Hoenig retired later in 2011). Warsh detailed his views and why he quit in a speech in 2018 at the Hoover Institution.
Warsh has long hammered on the Fed for its still huge balance sheet even after $2.4 trillion in QT. He wants to reduce the Fed’s balance sheet, but in cooperation with the Treasury to avoid disrupting markets. He says the large balance sheet got the Fed involved in fiscal matters, in funding the deficits, and that the Fed should not be involved in that. But this being a fiscal issue, the Treasury should have some say in the reduction of the balance sheet.
The media criticized Warsh back in the day for being an inflation hawk, even when inflation was relatively low. But he says inflation isn’t caused by rising wages and a rapidly growing economy, but by government spending and “money printing” – QE and the balance sheet. “Inflation is caused when the government spends too much and prints too much,” he said.
How much of an inflation hawk he will be if he is confirmed by the Senate remains to be seen. He said that inflationary pressures will decline because AI and other technologies would lead to productivity gains. But that might not work out that way. They might just lead to higher profits margins, especially in the services sector where companies have substantial pricing power, and where inflation is already high. They may not want to pass on those profits, if they materialize, to consumers.
But his hostility to “money printing” appears to be etched in stone, and he and Bessent agree on it. So this pulled the rug out from under the “debasement trade.”
The price of silver collapsed by 39% from the all-time high yesterday morning of $121.78 per ounce to about $75 at the low this afternoon. It then bounced off a little and currently trades at $85 an ounce, down by 30% from the all-time high yesterday. That is a huge historic move, even for silver.
Silver had a phenomenal run over the past 9 months, exploding by 317% from early April 2025 to the all-time high yesterday. Since early 2023, when it was trading at around $20, it exploded by 500%. Everyone and their dog were promoting silver. A classic mania. People make lots of money in manias.
And suddenly it popped. Yesterday evening already, as news appeared that Warsh and Trump had met, and that Trump would announce the Fed chair nomination Friday morning, people began to run for the exits to take profits, and the price dropped overnight, and forced selling set in on leveraged positions, just when buyers evaporated, and the bottom fell out.
Silver was already teetering after the breath-taking spike amid huge volatility when the Warsh nomination hit it and tripped it up.
The price of gold plunged by 14% from $5,575 yesterday morning to the intraday low today of $4,700. It has since then bounced some and is down 10% from yesterday morning, at $4,909 per ounce.
For long-term investors in precious metals – those that intend to let their heirs worry about what to do with their stack – none of this should be concerning. Manias and plunges occur periodically and are part of the long-term deal.
The dollar bounced a little. The DXY, which tracks the dollar against a basket of six currencies dominated by the euro and yen, rose by 1.7% from the low on Tuesday (95.55) to 97.15 currently, including a 0.9% rise today.
The dollar has spent much of the past 5 decades below that level. But the crisis media latched on to early January 2025, when the DXY had spiked to 110, and breathlessly hyped the drop since then. All of it was used by folks to hype the “debasement trade” and the collapse of the dollar, which helped drive gold and silver higher, when in fact the dollar is just kind of in the middle of its 50-year range:
Stocks dropped but not by much. It’s like nothing special happened. The S&P 500 fell by 0.4% for the day to 6,939, and is down less than 1% from its all-time high (7,002).
The Nasdaq Composite fell by 0.9% today to 23,461 and is down by 2.3% from its all-time high (24,020).
PPI came in hot this morning. May that did it. Stock investors essentially blew off the Warsh nomination. But they didn’t blow off Microsoft AI spend, and MSFT plunged by over 10% since its earnings call yesterday evening.
The Treasury market yawned upon the nomination of Warsh. The 10-year Treasury yield had ticked up 4 basis points last night, and then gave those up during the day, and ended the day essentially unchanged.
The price of oil has been zigzagging higher since January 7 on geopolitical issues. Today, WTI futures edged up 0.5% to $65.74 a barrel, up by about $10 from January 7. The Fed chair is irrelevant to the oil market.
Cryptos have been battered since early October, and the Warsh nomination added a little to it.
Bitcoin fell last night on the news of the Warsh meeting, but then recovered today. It’s now at about $84,000, but down from $90,000 on Wednesday, with much of the drop occurring Thursday morning, and down by 31% from the all-time high in October.
Ethereum USD declined about 4% since the news of the Warsh meeting last night, but that’s not a big move for a crypto. It’s down by 45% from its all-time high.