Gold prices fell sharply on Friday after market rumours suggested a more hawkish Federal Reserve chair could be appointed. The decline followed a strong rally that had pushed bullion to record highs earlier in the week. Despite the drop, gold remains on course for its strongest monthly performance in more than four decades.
Investors reacted swiftly to speculation surrounding US monetary policy leadership. Concerns over tighter policy weighed on precious metals. However, ongoing geopolitical risks and economic uncertainty continue to support long-term demand for gold as a safe-haven asset.
Spot gold dropped 3.9 percent to $5,183.21 per ounce. Earlier in the session, prices had fallen by as much as five percent. On Thursday, gold touched a record high of $5,594.82 per ounce, highlighting extreme volatility in the market.
Fed Chair Speculation Triggers Sharp Gold Sell-Off
The sell-off was driven by rumours that the next Federal Reserve chair may take a tougher stance on interest rates. US President Donald Trump confirmed he would announce his nominee to replace Jerome Powell on Friday. Powell is expected to step down in May.
Market chatter suggests former Fed governor Kevin Warsh could be selected. Analysts believe such a move would signal a less dovish monetary policy outlook. This expectation strengthened the US dollar and pressured gold prices.
According to market experts, gold had entered overbought territory after its rapid rally. A rebound in the dollar added further pressure. A stronger dollar makes gold more expensive for overseas buyers, reducing short-term demand.
US gold futures for February delivery fell 2.7 percent to $5,176.40 per ounce. The decline reflected cautious sentiment among traders reacting to policy uncertainty.
Gold Still Set for Best Monthly Gain Since 1980
Despite Friday’s losses, gold remains on track for a historic monthly gain. Prices have surged more than 20 percent so far in January. This marks the sixth consecutive month of gains for the precious metal.
If the trend holds, it will be gold’s largest monthly increase since January 1980. Investors have poured into gold amid persistent geopolitical tensions and fears of economic instability. Demand for safe assets remains strong.
Markets continue to expect two interest rate cuts in 2026. This outlook has supported gold prices throughout the month. Lower interest rates typically reduce the opportunity cost of holding non-yielding assets like gold.
Data also shows increased physical demand. Gold exports from Switzerland to the UK rose to their highest level since August 2019. The UK hosts the world’s largest over-the-counter gold trading hub.
Meanwhile, the Hang Seng Gold ETF surged more than nine percent on its trading debut in Hong Kong. The strong debut reflects growing investor appetite for gold-linked products in Asia.
Silver, Platinum, and Palladium See Mixed Moves
Other precious metals also faced sharp price swings. Spot silver fell 5.7 percent to $109.55 per ounce. The metal had reached a record high of $121.64 on Thursday.
Despite the pullback, silver has surged 56 percent this month. It is heading for its best monthly performance on record. Strong industrial demand and investor interest have driven the rally.
Spot platinum declined 5.3 percent to $2,489.31 per ounce. Prices had touched an all-time high of $2,918.80 earlier in the week. Palladium moved in the opposite direction, rising 5.8 percent to $1,890.25 per ounce.
Markets remain volatile as investors weigh policy signals against global risks. Precious metals are likely to stay sensitive to Fed developments in coming sessions.
