The market focuses on the new Federal Reserve Chairman, the dollar strengthens, U.S. bonds fall, and the commodity market encounters Black Friday, with silver prices falling 7% and gold prices falling 5%

# Source: Wall Street News

# By Bao Yilong

Spot gold plummeted more than 4% to stand at $5,174 per ounce. Spot silver dropped 7.0% intraday to $107.24 per ounce. The US dollar strengthened, with USD/JPY breaking above 154 and rising 0.6% on the day. The yield on the US 10-year Treasury note climbed 4 basis points to 4.27%. International oil prices also came under pressure, with both WTI and Brent crude falling more than 1%.

Kevin Warsh has once again emerged as the frontrunner for the Federal Reserve Chair position. Long known for his hawkish stance, expectations of his appointment have quickly lifted the US dollar and US Treasury yields, weighing on commodity prices. Futures across domestic and international markets trended broadly lower, with precious metals bearing the brunt of the declines.

As reported by Wall Street News, on the evening of January 29 US Eastern Time, US President Donald Trump stated that he would announce his nominee for the Federal Reserve Chair on Friday morning (Beijing time tonight). According to the latest media reports, the Trump administration is preparing to nominate Kevin Warsh to serve as the Fed Chair.

Affected by the news, the MSCI Asia Pacific Index fell 0.7%, S&P 500 index futures dropped 0.4%, spot gold plunged over 4%, and spot silver slid 7.0% intraday to $107.24 per ounce. The US dollar, by contrast, moved higher, with USD/JPY breaking above 154 and gaining 0.6% on the day. The yield on the 10-year US Treasury note rose 4 basis points, and Bitcoin led losses in the cryptocurrency market.

Brendan Fagan, a Bloomberg strategist, noted that any assessment of a potential Warsh-led Federal Reserve starts with the past, and this bodes well for US markets facing a rising risk premium. Warsh’s appointment in itself does not signal a shift in monetary policy, but it will materially improve perceptions of the Fed’s independence, quash fears of political compliance or inflation rationalization, and provide a favorable tailwind for the US dollar.

S&P 500 index futures fell 0.4%.

Euro Stoxx 50 futures rose 0.6%.

South Korea’s KOSPI closed nearly flat at 5,221.36 points, posting a 24% gain in January – the largest monthly rise since December 1998.

Indonesia’s stock market rose 1.7% on Friday, paring its two-day cumulative decline to 6.5%.

The US Dollar Index (DXY) advanced 0.4%.

USD/JPY broke above 154, rising 0.6% intraday.

The US 10-year Treasury yield climbed 4 basis points to 4.27%.

Spot gold plummeted more than 4% to $5,174 per ounce.

Spot silver dropped 7.0% intraday to $107.24 per ounce; New York silver fell 6.0% on the day to $107.47 per ounce.

West Texas Intermediate (WTI) crude oil declined 1.2% to $64.63 per barrel.

According to an analysis by Deutsche Bank, if Warsh is elected Fed Chair, his policy stance is likely to feature a unique combination of "interest rate cuts alongside balance sheet reduction". Investors have started pricing in a future with potentially faster liquidity tightening, and the US Dollar Index rose sharply during the Asian trading session on Friday, gaining 0.43% intraday.

The yield on the 10-year US Treasury note rose to 4.266%, exerting direct pressure on non-interest-bearing assets. The bulk commodity market suffered a broad sell-off, with futures across domestic and international markets trading lower across the board – precious metals were the hardest hit and led the market declines.

After a record short squeeze-driven rally in the prior period, spot gold prices plummeted more than 4% at one point during the Asian trading session on Friday.

In the domestic futures market, the main contracts of Shanghai gold and Shanghai silver both fell more than 2%, while platinum and palladium futures, which had seen even more ferocious gains in the early stage, saw their intraday declines widen to 10% and 7% respectively.

Industrial metals were not spared either. The strong US dollar has directly dented the demand outlook for dollar-denominated industrial commodities, with major LME (London Metal Exchange) contracts including copper, nickel and tin all falling by 2% or more.

In the domestic futures market, the main contract of polysilicon fell nearly 5%, and lithium carbonate futures contracts, linked to the new energy sector, plummeted as much as 10% intraday.

International oil prices also faced headwinds, with both WTI and Brent crude falling more than 1%.

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