After The Warsh Shock, Gold Bulls Return - A 6% Surge Not Seen Since The Financial Crisis

Gold futures surged nearly 6% in early Tuesday trading, climbing back above $4,900 per ounce, as bargain hunters stepped in after two brutal sessions of selling.

If these gains hold through the session, gold – as tracked by the SPDR Gold Shares (NYSE:GLD) – would be on track for its strongest single-day performance since November 2008, following a two-day slump of 13.5% — the worst since 2013.

Silver followed with even more dramatic moves. Futures jumped nearly 12% to around $90 per ounce, rebounding from a historic 31% collapse over the previous two sessions.

The sudden snapback has traders asking a familiar question: Was this capitulation — or just a pause in the storm?

Chart: Warsh Crash, Then Whiplash: Gold Eyes Its Strongest One-Day Rally Since 2008

Why Did Gold And Silver Plunge So Hard?

Gold tumbled 9% while silver nosedived 26% last Friday after President Donald Trump nominated Kevin Warsh to become the next Federal Reserve chair when Jerome Powell's term ends in May.

Warsh is widely seen as more hawkish than other Fed contenders. He has publicly supported a major "regime change" at the Fed, including sizable cuts to the central bank's balance sheet.

That stance boosted the U.S. dollar — which typically moves opposite to gold — and triggered an abrupt repricing across precious metals.

Gold and silver had rallied sharply for over six months on fears the Fed could lose its monetary anchor and bow to political pressure for lower rates.

But those expectations unraveled fast as fears over the loss of Fed independence subsided with Warsh.

Precious Metals Rebound On Tuesday: What's Behind It?

On Tuesday Federal Reserve Governor Stephen Miran said he still expects substantial interest rate cuts this year.

In comments on Fox Business, Miran said current policy is too restrictive for the economy and that underlying inflation pressures are "more benign," supporting the case for lower rates.

"I'm probably looking for a little bit more than a point of interest rate cuts over the course of the year," Miran said. He added that stronger growth prospects do not require higher interest rates and that the Fed can reduce borrowing costs without reigniting inflation.

Notably, Miran said he is excited to see what Warsh does as Fed chair and said Warsh is a fantastic choice to lead the Fed.

Miran's term as governor ended in January, but he remains in the role until a successor is confirmed.

Is The Worst Over For Gold And Silver?

Some traders see Tuesday's move as a technical rebound after extreme positioning. David Morrison, senior market analyst at Trade Nation, said precious metals staged a sharp rebound after a brutal sell-off that began late last week.

Morrison said gold slid toward $4,400, marking its lowest level in nearly a month and leaving prices down 21% from Thursday's high. He said prices then rebounded sharply, climbing back above $4,900 in early trading.

Silver suffered an even steeper move, slumping 41% from Thursday's high to Monday's low near $70 per ounce, before staging a strong recovery.

"Could that mean the downside correction is over? Who knows," Morrison said.

"But traders should not assume that it won't continue to be volatile," he added.

According to Morrison, precious metals remain prone to whipsaw moves that can quickly turn painful and costly for traders caught on the wrong side.

Image created using artificial intelligence via Midjourney.