Gold prices dropped sharply on Friday as speculation grew that the Federal Reserve could be led by a more hawkish chair. Despite the steep selloff, the precious metal remained on course for its strongest monthly performance since 1982, supported by strong safe-haven demand amid persistent geopolitical and economic uncertainty.
Spot gold fell 4.2% to $5,172.80 per ounce by 07:16 GMT, after sliding more than 5% earlier in the session. The metal had surged to a record high of $5,594.82 on Thursday.
Even after the pullback, gold prices were still up more than 20% in January, marking a sixth consecutive monthly gain and the largest monthly increase in over four decades.
U.S. gold futures for February delivery declined 3% to $5,163.90 per ounce.
Market participants cited a shift in expectations around U.S. monetary policy as a key driver of the decline. Tim Waterer, chief market analyst at KCM Trade, said the selloff reflected “the prospect of a less dovish Fed chair, a rebound in the U.S. dollar, and gold retreating from overbought levels.”
President Donald Trump said on Thursday that he plans to announce his nominee to replace Fed Chair Jerome Powell on Friday, fueling speculation that former Fed Governor Kevin Warsh could be selected.
“Rumours that Kevin Warsh will succeed Jerome Powell as Fed chair weighed on gold during Asian trading,” said Matt Simpson, a senior analyst at StoneX.
The U.S. dollar rebounded from multi-year lows, supported in part by the Fed’s decision earlier this week to keep interest rates unchanged. Even so, the greenback was still on track for a second consecutive weekly decline.
A firmer dollar typically pressures gold by making it more expensive for buyers using other currencies. Markets are currently pricing in two U.S. interest rate cuts in 2026.
Meanwhile, physical gold flows remained strong. Swiss customs data showed that gold exports from Switzerland to the UK — home to the world’s largest over-the-counter gold trading hub — climbed to their highest level since August 2019.
Investor appetite was also evident in Asia, where the Hang Seng Gold ETF surged more than 9% on its trading debut in Hong Kong during the previous session.
Other precious metals also came under heavy pressure. Spot silver fell 6.1% to $109.03 per ounce after hitting a record high of $121.64 on Thursday. Despite the drop, silver was still up 53% this month, on track for its strongest monthly gain on record.
Platinum slid 7.1% to $2,443.65 per ounce after reaching an all-time high of $2,918.80 earlier in the week, while palladium dropped 7.3% to $1,860.00 per ounce.
