On January 30, global capital markets experienced the first "Black Friday" of 2026. The runaway rally in precious metals suddenly crashed into a deep pit. By the close of A-shares trading, the main gold futures contract had also fallen sharply by 4.71%, while silver plunged 6.03%, marking its largest single-day drop since April 8, 2025. Palladium and platinum both plummeted by nearly 12%, and precious metals concept stocks in the equity market almost collectively hit their daily downside limits. In the US market, as of the time of writing, the main New York silver contract had tumbled by nearly 17% at one point, and the US silver ETF index plummeted over 14% in pre-market trading, while the Nasdaq index also fell more than 1% pre-market.
Just last night, major news broke that Trump would nominate Kevin Warsh to lead the Federal Reserve as Chairman, with an official announcement expected tonight! Previously, Warsh has been widely viewed as a relatively hawkish candidate for the Fed; markets anticipate that if he takes office, the pace of interest rate cuts would be slower, and he might even advance quantitative tightening (QT) concurrently with rate cuts, thereby tightening long-term liquidity. Currently, Warsh's probability of winning on betting websites has instantly surged to 93%, indicating the Federal Reserve is highly likely to enter the "Warsh Era."
Reviewing the past few months, continuous massive inflows of global capital ultimately fueled an "epic" surge in precious metals, led by silver, reaching a degree that bordered on being out of control. The main New York silver futures contract rose from its low of $27.55 per ounce in April 2025 to its recent peak, accumulating a gain exceeding 3.4 times. Even just from the November low, the increase surpassed 1.5 times, accompanied by significantly higher trading volumes, ultimately creating an exceptionally powerful short-squeeze force.
Speculative funds likely did not anticipate that as the final delivery period for January New York silver approached, the risk of a major reversal was rapidly mounting. The delivery period for COMEX silver in January 2026 was January 2 to January 29; the closer it got to the deadline, the more critical the short-squeeze phase became. According to earlier media reports, by late January, COMEX silver deliverable inventory was approximately 127 million ounces (≈3,956 tonnes), representing only 29% of the total inventory (12,952 tonnes). Furthermore, the actual amount of eligible silver ingots readily available for delivery (excluding occupied/non-eligible stock) was only about 20–25 million ounces (approx. 62–78 tonnes), far lower than the book value, thus creating significant delivery pressure.
However, it's worth noting that the January 2026 contract is a non-active contract, with open interest far lower than the main March contract, meaning the actual volume entering delivery was not substantial. According to relevant data, as of January 29 (the final delivery day for the January silver contract), registered warrants (directly deliverable) on the NYMEX were approximately 107.7 million ounces (≈3,350 tonnes), while the open interest for January contract deliveries was around 7.5–10 million ounces (≈233–311 tonnes). This situation did not indicate a "large, insurmountable delivery shortfall," as many contracts that the market was highly concerned about chose to close positions before the final delivery date rather than proceeding to apply for delivery.
Nevertheless, silver does face a real crisis of a massive supply-demand gap. With countries adding silver to strategic reserves and implementing export controls, coupled with the already substantial profit-making effect, the supply-demand deficit for silver continues to widen at an accelerating pace. Data suggests the global silver market has been in deficit for six consecutive years, with the 2026 deficit expected to expand by approximately 91%-119% compared to 2025. The cumulative deficit from 2021 to 2026E exceeds 20,000 tonnes, nearly equivalent to one year of global mine production.
It must be pointed out that on the evening of January 29, the silver futures market experienced an extreme collective short squeeze followed by a sudden wave of position unwinding and retreat. Before 11 PM that night, silver prices were still up over 7%, hitting a record high, before encountering massive sell orders and turning to a decline of over 6% within half an hour. Behind this, besides funds executing an extreme squeeze near the delivery deadline and then selling off, another major trigger was market rumors emerging at that time about Trump announcing Kevin Warsh's appointment to lead the Fed.
Capital markets clearly have mixed feelings about Kevin Warsh leading the Federal Reserve. There is hope that he can control US inflation and the runaway expansion of the balance sheet, but also concern that his overly hawkish stance might not be conducive to maintaining loose market liquidity. Warsh's policy DNA is deeply etched with the crisis memories from his term as a Fed Governor (2006-2011). As a core opponent of QE2, he once protested with the extreme measure of resigning, steadfastly maintaining his critical stance against the "normalization of quantitative easing," making him a rare "hawkish dissenter" within the Fed.
Based on market predictions, if Warsh takes office, he is highly likely to initiate quantitative tightening in the second quarter of 2026, with a monthly reduction pace potentially reaching $50-80 billion. The goal would be to gradually compress the current balance sheet, which exceeds $7 trillion, down to a reasonable level around $4 trillion, similar to pre-pandemic times. On the surface, Warsh's expressed support for rate cuts appears to align with Trump's desire for "low interest rates," a key reason his nomination probability surged. However, at a deeper logical level, their positions are fundamentally opposed.
Therefore, the market tends to believe that monetary policy under the Warsh era could potentially reshape the pricing logic of global major asset classes and the pattern of cross-border capital flows. In the short term, the accelerated QT plan likely championed by Warsh would directly tighten global US dollar liquidity. Combined with markets pricing in this faster QT pace ahead of time, this could drive the US Dollar Index back to strength. Following today's news, the Dollar Index has already shown signs of stabilizing and rising.
For equity markets, which had been betting on continued Fed rate cuts fostering easy liquidity, leading US indices to historical highs, the likely appointment of the relatively hawkish Warsh changes market expectations. From a sector perspective, market participants worry that Nasdaq heavyweights, growth-oriented tech stocks, and other sectors reliant on low-rate environments for valuation support, along with non-yielding assets like gold and cryptocurrencies, might face sustained valuation correction pressure.
The Federal Reserve entering the Warsh Era essentially represents a profound reflection and correction of the "interventionist" monetary policy paradigm since 2008. However, this reform path is destined to be arduous—facing internal resistance due to lack of consensus, external political pressure from Trump, and the delicate task of balancing QT with rate cuts to avoid market risks. For global markets, this similarly marks an era filled with uncertainty.
For precious metals like gold and silver, although they might suffer short-term volatility due to uncertainties surrounding Warsh's potential leadership, the fundamental industry logic remains unaffected. Against a backdrop of ongoing geopolitical tensions and long-term supply-demand imbalances, future prices still hold significant potential for substantial increases.
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