Recently, Kevin Warsh's nomination as the next Federal Reserve Chair has sparked expectations of a “hawkish” stance. The market widely believes that future Fed monetary policy may be less “dovish” than previously anticipated, easing concerns over the Fed's independence and driving a rebound in the U.S. Dollar Index. Additionally, with precious metals having risen rapidly earlier, some investors are looking to take profits. Short-term market sentiment has shifted quickly, and silver prices may continue their weak adjustment phase.

Silver Prices Plunge Sharply

Recently, silver prices have undergone significant adjustments. During the night session on January 30, Shanghai silver futures contracts hit the daily limit-down, while London spot silver closed down 26.42%. The previous sharp rise in silver prices was largely driven by heightened market investment sentiment, whereas the current decline stems more from concentrated exits by earlier bullish positions.

Since late November 2025, Shanghai silver futures surged from 13,000 yuan/kg to over 32,000 yuan/kg. While macro-level bullish factors like geopolitical risks and de-dollarization existed, the short-term rally was largely driven by concentrated investment inflows, exhibiting clear signs of overvaluation. Subsequently, influenced by factors such as profit-taking by long positions and a sharp rebound in the U.S. dollar index, a stampede-like correction occurred due to the concentrated exit of long positions.

Furthermore, over the past two months, silver prices have significantly outperformed gold, causing the gold-silver ratio to rapidly decline from 80 to below 50. Even after this sharp correction, the gold-silver ratio has only recovered to around 57, remaining below the 20-year average of approximately 70. Currently, gold prices are relatively stable, with solid macroeconomic support, limiting the potential for further significant declines. Looking ahead, silver prices may still have room to fall amid expectations of a gold-silver ratio rebalancing.

Wash Nomination Marks Key Turning Point

On January 30, U.S. President Trump formally nominated former Federal Reserve Governor Kevin Warsh as the next Fed Chair, succeeding Jerome Powell who will step down in May. This personnel move swiftly sent shockwaves through financial markets: the U.S. dollar index reversed its decline to rise, while gold and silver prices suffered rare sharp plunges as market sentiment abruptly reversed.

Wash advocates cautious rate cuts in the short term while firmly upholding Fed independence in the medium to long term. His cautious stance on rate cuts was clearly reflected in his statement this year that “inflation is an option.” Regarding central bank independence, his core philosophy is “each to their own role,” insisting that monetary policy should focus on monetary matters and fiscal policy on fiscal matters. This is concretely manifested in his explicit support for the Fed to pursue significant balance sheet reduction in the future. In other words, Wash believes the Fed should implement a “rate cut + balance sheet reduction” policy combination going forward and push for “institutional reform” at the Fed, advocating for monetary policy to return to a framework of quantitative control and institutional constraints.

Influenced by Trump's repeated public statements, including remarks like “it's reasonable for the dollar to fluctuate like a yo-yo” and “I'm not worried about the dollar falling,” market expectations for a prolonged weakening of the dollar have intensified. On January 30, the U.S. Dollar Index briefly dipped to 95.56, hitting a four-year low. Even after the Fed paused rate cuts at its January meeting—maintaining the federal funds rate at 3.50%-3.75% while adopting more optimistic language on employment and inflation—it failed to reverse the dollar's decline.

Wash's nomination emerged as a pivotal turning point. Markets widely interpreted his appointment as a “hawkish” signal, anticipating that his potential leadership would curb the prevailing “currency depreciation trade” logic and bolster the appeal of dollar-denominated assets. Previously, markets had bet on the Fed losing its independence and embarking on an aggressive rate-cutting cycle, driving capital into precious metals for hedging. However, the “hawkish” expectations unleashed by Wash's nomination directly undermined this logic.

Fed Rate Cut Timing May Be Delayed

On January 28-29, the Federal Reserve held its first policy meeting of 2026, announcing it would maintain interest rates within the current range of 3.50% to 3.75%. Following three consecutive rate cuts in the final three meetings of 2025, the Fed has entered a “wait-and-see period” with paused rate cuts. Fed Chair Powell did not provide clear signals during the press conference about when the next rate cut might occur.

In 2026, monetary policies among major global central banks may diverge. The Fed initiated rate cuts in September last year and implemented three consecutive reductions. Currently, the market remains optimistic about further Fed rate cuts this year. The Bank of England and the European Central Bank have paused their rate-cutting cycles, continuing to monitor inflation and economic performance. In 2026, the U.S. economy is expected to achieve a “soft landing,” while inflation faces some upward pressure. Overseas monetary policies are projected to remain neutral to accommodative, though the overall pace may slow. It cannot be ruled out that the U.S.

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