Financial Markets Reel from Sharp Reversals as Dollar Strengthens Amid Fed Nomination Fallout

January 31, 2026

Global financial markets closed out January with widespread turbulence, as precious metals and cryptocurrencies endured severe corrections while the U.S. dollar rallied and major stock indices posted modest declines. The volatility capped a month of extraordinary gains for many assets, driven earlier by geopolitical uncertainties and safe-haven demand, but reversed sharply following President Donald Trump's nomination of Kevin Warsh as the next Federal Reserve chair. Investors interpreted the pick as signaling preserved central bank independence, boosting the dollar and triggering profit-taking across risk assets.

The S&P 500 fell 0.43 percent to close at 6,939.03, extending losses from the previous session amid broader caution in technology and growth sectors.

Precious Metals Suffer Historic Selloffs

Gold prices plunged dramatically, dropping as much as 10 percent in intraday trading before settling around 4,900 U.S. dollars per ounce, down roughly 485 dollars or 9 percent from the prior close. The decline marked one of the largest single-day percentage drops in decades, erasing a significant chunk of January's 15 percent monthly gain that had propelled the yellow metal to record highs above 5,600 dollars earlier in the month.

Silver faced an even more brutal reversal, crashing 27 percent to approximately 85 dollars per ounce, a loss of about 30 dollars from its previous level. The white metal's outsized decline widened the gold-silver ratio to over 57, highlighting its vulnerability to industrial demand shifts and speculative unwinding. Despite the pullback, silver remains up more than 18 percent for the month, reflecting strong underlying interest in its dual role as a hedge and manufacturing input.

Analysts attributed the metals rout to the stronger dollar and reduced expectations for aggressive Federal Reserve rate cuts under Warsh's potential leadership, which diminished the appeal of non-yielding assets.

Cryptocurrencies Extend Downtrend

Bitcoin hovered near 82,000 U.S. dollars, down about 2 percent on the day and extending its slide from mid-January peaks above 100,000 dollars. The flagship cryptocurrency has shed over 7 percent this month, diverging from its earlier correlation with precious metals as institutional outflows from spot exchange-traded funds accelerated.

Ethereum traded around 2,700 dollars, reflecting similar weakness with a daily drop of roughly 3 percent. Broader altcoins followed suit, with the total crypto market capitalization contracting by more than 5 percent amid liquidations exceeding 1 billion dollars in leveraged positions.

The sector's retreat comes despite persistent narratives around digital assets as inflation hedges, underscoring sensitivity to dollar movements and macro policy signals.

Dollar Index Climbs on Policy Clarity

The U.S. dollar index climbed 0.74 percent to 96.99, marking its strongest daily gain in weeks and trimming monthly losses to about 2 percent. The greenback's rebound pressured commodities and emerging market currencies, as traders scaled back bets on dovish Fed actions following the Warsh nomination.

The index remains down more than 10 percent year-over-year, reflecting broader shifts in global trade dynamics and tariff concerns under the new administration.

Stock Markets Close Month with Caution

Major U.S. indices ended January on a subdued note. The S&P 500's close at 6,939.03 represented a 0.43 percent daily decline but capped a monthly advance of around 1 percent. The Dow Jones Industrial Average slipped 0.5 percent to finish near 45,000, while the Nasdaq Composite fell 0.6 percent amid continued pressure on big tech names following mixed earnings.

European and Asian markets mirrored the caution, with the FTSE 100 down 0.3 percent and the Nikkei 225 shedding 0.4 percent in their respective sessions.

Volatility Ahead as Policy Uncertainties Linger

With markets digesting the Fed nomination and eyeing upcoming economic data, including employment figures next week, volatility measures like the VIX rose modestly to around 18. Analysts anticipate continued choppiness as investors reassess rate paths and geopolitical risks.

While the sharp corrections in metals and crypto may attract bargain hunters, the dollar's strength could cap near-term recoveries. For now, the financial landscape reflects a delicate balance between policy optimism and risk aversion, setting the stage for a potentially pivotal February.