With former Federal Reserve governor Kevin Warsh nominated as the new Fed chair, the mood in financial markets has turned uneasy. From the night of the 30th of last month (local time) through the weekend, U.S. stocks, gold, silver, and crypto all wobbled. Silver plunged 31% in a single day and gold 11%, marking the steepest declines in 46 years since 1980. Bitcoin fell intraday to the $75,000 level, the lowest since April last year. The strong-dollar trend pushed the wondollar exchange rate higher again. There is growing expectation that the domestic financial market could stagger for the time being.

On the 30th (local time) at the New York Mercantile Exchange (COMEX), international gold futures settled at $4,745.10 per ounce, down 11.39% from the previous session. After topping $5,500, gold prices dropped by roughly $700 in a flash.

International silver futures followed suit. After trading above $115 per ounce, they fell to $78.53. The 31.37% one-day plunge took prices back to early last month’s levels. At one point intraday, the drop exceeded 36%.

For gold, it was the largest decline since January 1980; for silver, since March 1980. Considering the size of the gold and silver markets, about $4.75 trillion (6,897 trillion won) in value evaporated in a single day.

Bitcoin also slid. On the 31st it plunged more than 9% intraday to around $75,800, while Ethereum fell by double digits. According to CoinGecko, as of 9 a.m. on the 1st (Korean time), more than $180 billion (261.18 trillion won) in market capitalization was wiped out from the digital-asset market over 24 hours.

The sharp decline came as sentiment abruptly turned from an overheated state. With an ‘AI investment overheating’ debate already stoked by Microsoft (MS) earnings, the nomination of Warsh, viewed as relatively hawkish (favoring tightening), intensified market anxiety.

Warsh, who served as a Fed governor during the 2008 financial crisis, has emphasized price stability and voiced opposition to balance-sheet expansion (quantitative easing). The view is that expanding the balance sheet by buying assets to inject liquidity can distort asset prices rather than stimulate the real economy.

For that reason, markets expect Warsh to cut rates while moving to shrink the balance sheet (the central bank pulling back money it had supplied). That runs counter to expectations that more liquidity would lift prices of risk assets such as stocks.

The nomination of Warsh also strengthened the dollar. The view is that balance-sheet reduction would create a quantitative-tightening effect, boosting the dollar’s value. The Bloomberg Dollar Index, which compares the dollar against 10 major currencies including the won, rose 0.89% on the 30th from the previous session, the biggest gain since May last year. This also explains the plunge in gold and silver, which serve as safe-haven substitutes for the dollar.

Seo Sang-young of Mirae Asset Securities said, “After Trump nominated Warsh and the dollar strengthened, that became a pretext for selling in gold and silver, leading to a ‘panic sell’.”

Domestic investors also appear likely to suffer losses. In just the past month, local investors sharply increased purchases, buying more than 1 trillion won worth of domestically listed gold and silver exchange-traded funds (ETFs). But the plunge in international prices has made losses unavoidable. In particular, Korean retail investors who trade overseas bought $37.29 million (about 54.1 billion won) of the double-long silver product ‘ProShares Ultra Silver ETF’ in the past month, only to see it plunge 60% in a single day.

Anxiety is spreading in the domestic financial market as well. Right after Warsh was nominated on the 30th, in the Seoul foreign-exchange market the won-dollar rate climbed in after-hours trading to as high as 1,447 won intraday on dollar strength. Compared with the previous regular-session close, the intraday rate jumped by more than 20 won.

Volatility in the domestic stock market is also expected to increase. As risk aversion grew, foreign investors were net sellers of 2.1387 trillion won in the local market on the 30th. A weaker dollar had driven steep gains in emerging markets including Korea and Brazil, but a shift back to a strong dollar could be a negative for those markets.