Is Kevin Warsh Good for Gold?

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The recent news cycle managed to do two things at once:  It gave markets a new Federal Reserve nominee to chew on – Kevin Warsh – and it delivered a arring sell-off affecting the price of gold.

Bullion.Directory precious metals analysis 31 January, 2026
By Peter Reagan
Financial Market Strategist at Birch Gold Group

Who Kevin Warsh is (and who he isn’t)

As you can gather from the WSJ‘s recent profile, Kevin Warsh isn’t a bomb-thrower. He’s not a populist crusader and he’s not arriving in Washington with a match and a can of gasoline.

He’s a former Federal Reserve governor, appointed by George W. Bush at just 35 years old – the youngest Fed governor in modern history. During the 2008 financial crisis, Warsh was inside the room, serving as the Fed’s primary liaison to the finance industry and representing the U.S. at G-20 crisis meetings. He understands how the institution actually works because he helped run it during its most stressful moment.

His institutional insider perspective matters.

Just as important: Warsh has spent years criticizing what came after 2008 – not the emergency response itself, but the way crisis tools quietly became default policy. Quantitative easing, balance-sheet expansion, and “whatever it takes” messaging stopped being fire extinguishers and started becoming central planning.

That combination – insider credibility plus post-crisis skepticism – is exactly why markets didn’t panic on the news. The reaction we’ve seen looks far more like relief than fear.

This nomination signals discipline, not demolition.

Why assets are repricing around the Warsh nomination

There are three reasons the Warsh pick landed calmly.

First, institutional credibility. Warsh knows the plumbing. That reduces the risk of policy accidents during a transition period – something markets always worry about.

Second, independence optics. Unlike some names floated in recent months, Warsh isn’t viewed as a White House proxy. Even critics of President Trump in and around the Beltway have acknowledged that. That matters because the Fed’s credibility problem today isn’t that it lacks independence – it’s that it squandered trust by overstimulating, then ignoring inflation and finally overcorrecting. While pretending none of it happened. (It’s that gaslighting that upsets me personally.)

Warsh is the kind of nominee who seems like he can run the Fed without taking orders from the White House. That’s important for the Fed’s credibility and the dollar’s value.

Third, real reform – not theatrics.  Warsh has openly talked about a monetary “regime change.” Reuters has reported extensively on this, among others. His core argument is simple, and it goes like this.

After 2008, investors saw that any time prices wavered, the Fed would intervene. More quantitative easing, more asset purchases – more midnight meetings of the legendary “Plunge Protection Team.” Financial markets were conditioned to expect rescue. Remember the phrase “Greenspan put”?

Obviously, that inflated asset prices, penalized savers with 0% yields on their savings and made inflation unavoidable. Ultimately, though, the “Greenspan put” left the Fed backed into a corner with fewer tools to respond in emergencies.

That’s a real challenge.

Now, Warsh’s approach isn’t “never intervene to prop up the economy.”

His approach is “don’t always intervene.” 

When necessary, he says, the Fed should first take action – then stop.

He’s the kind of guy who believes in using the fire extinguisher when you have to – and then, putting it back on the wall.

That’s the kind of sensible, no-nonsense monetary policy that soothes rattled nerves.

The real risks ahead

That doesn’t mean there are no risks.

Markets will test Warsh’s independence, especially with Jerome Powell remaining in the chair until May. Mixed messaging is already a low-grade problem at the Fed, with FOMC members contradicting each other in public every week. Waller and Miran say lower rates are coming; Bowman and Schmid say rates should go up… And of course investors overreact (both ways) after every speech.

The last thing we need is Powell and Warsh competing with one another to run the Fed before Powell’s term expires in May.

Then there’s the nomination process… A divided Senate and ongoing legal noise around Powell and Cook could stretch the process and prolong uncertainty.

But here’s the key point:  Those risks don’t come from Warsh himself.

They come from markets trying to front-run a policy shift that hasn’t happened yet.

A big day for gold and silver 

I’ve been in the industry for a long time now, and I can’t remember a more chaotic day for gold and silver prices.

But it wasn’t a verdict on gold’s long-term role as an asset.

We didn’t see a surge in the dollar or a sudden pivot toward risky assets. Rather, what we saw was a positioning unwind. A whole lot of fast money and extreme leverage cashed out today. (By the way, that happens after every historic run in every asset!)

When gold, silver, platinum, copper, U.S. debt and bitcoin all fall on the same day? That’s not judgment. That’s a risk reset.

Here’s what I think happened: The Warsh nomination gave markets a temporary excuse to take profits. A momentary sense that discipline might return someday.

Investors are pricing less panic about inflation today, not a solved inflation problem tomorrow. Think about it:

• Debt dynamics didn’t change.
•  Fiscal math looks the same.
•  Rate-cut expectations are still there.

Even the world’s greatest Fed chair nomination can’t erase structural debt, fiscal dominance or political pressure on rates.

“If gold is a store of value, how can it move so much in a single day?”

It’s so strange to me that nobody asks that question when gold is going up… But when we see a one-day drop in the price of gold, everyone suddenly becomes a skeptic.

Here’s what I tell them:

Because stores of value are judged over decades – not Fridays.

Gold is a reserve asset. Reserve assets reprice when they go up too far, too fast.  Then they re-anchor once leverage clears out and the supply-and-demand dynamic is back in the driver’s seat.

Consider this: If volatility disqualified an asset from being a store of value:

• Businesses wouldn’t qualify (they’re judged on quarterly earnings)
• Government debt wouldn’t qualify – just look at what Japan’s been going through the last couple of weeks!
• Real estate wouldn’t qualify – remember 2008? Or consider the commercial real estate collapse we’re seeing today…
• Not even cash would qualify (inflation settled that argument)

If we take a long view, what matters is abandonment versus adjustment. To me, this looks like adjustment.

Physical precious metals markets remain tight. You can tell, because offshore pricing dislocations haven’t vanished (Hong Kong and Mumbai metals are still significantly higher today.)

That tells us demand didn’t disappear – leverage did, as Reuters describes. Nicky Shiels, head of metals strategy at MKS PAMP, set “worst-case scenario” downside targets for gold at $4,600; silver at $80 and platinum at $2,000. (I’m frankly shocked that these are “worst-case scenario” numbers!)

Overall, though, this is classic late-cycle behavior: A fast rise, crowded trades, violent pullback and fundamentals temporarily ignored.

That’s not the end of a story.  That’s the middle.

Is the Warsh nomination good for gold?

The Warsh nomination says the White House wants reform, not chaos.  Markets are cautiously optimistic – and that’s appropriate!

We should all be cautiously optimistic that Warsh will do a better job than Powell has.

Precious metals tell us that leverage got ahead of itself. But not that the long-term case for diversifying with gold and silver vanished overnight.

It’s very important to remember the following: Price is not purpose. Price is what you pay, value is what you get. And traders always move faster than fundamentals.

The U.S. is walking a fine line. If credibility returns to monetary policy, volatility cools. We can start thinking about upside potential as a nation instead of packing up our bug-out bags. But if politics bleeds back into policy, volatility returns fast… Here’s the bottom line: The case for diversifying with physical precious metals hasn’t changed. Not even a little bit.

Prices move every day (my colleague Phillip Patrick even says we should ignore spot price). Some days that’s a good idea.

This article was originally published here

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