Gold drops 4% on Fed chair speculation, still heads for best month since 1982

Gold prices dropped sharply on Friday, declining more than 4% as markets reacted to speculation that President Donald Trump could appoint a more hawkish successor to Federal Reserve Chair Jerome Powell. Spot gold fell to around $5,161.50 per ounce after hitting a record high of $5,595.46 on Thursday. Despite the pullback, the precious metal is still set to post its largest monthly gain since 1982, with prices up about 3.5% for the week and roughly 85% over the past year.

Silver Also Retreats After Record Rally

Silver followed a similar downward move, plummeting 8% to around $106.36 per ounce after reaching an all-time high of $121.67 on Thursday. Even after Friday’s decline, silver has soared more than 235% over the past 12 months, driven by the same geopolitical and economic uncertainties that have fueled gold's rally.

Fed Speculation and Geopolitical Calm

Investor attention centered on Trump's expected Friday announcement of his nominee for Fed chair, with former Fed Governor Kevin Warsh widely seen as a leading candidate. Although historically viewed as an inflation hawk, Warsh has recently aligned with Trump in calling for lower interest rates. In parallel, Trump stated he plans to hold talks with Iran, easing immediate fears of military escalation, though he emphasized a “very big, very powerful” naval presence continues to move toward the region.

Dollar and Rate Outlook

The U.S. dollar recovered slightly from multi-year lows after the Fed left rates unchanged on Wednesday, though it remained poised for a second consecutive weekly decline. A stronger dollar typically weighs on gold, which is priced in the currency. Markets continue to price in two Fed rate cuts in 2026, maintaining a supportive backdrop for non-yielding bullion in the medium term.