Gold and silver fluctuate after the Jackson Hole meeting: Has the logic of currency depreciation trading changed?

Since Powell signaled a dovish stance at the Jackson Hole meeting in August 2025, market trading based on currency depreciation expectations has continued to heat up. Although recent precious metal markets have experienced intense volatility, expectations for the Fed’s long-term easing policy remain unchanged. This ongoing trade, centered around currency devaluation and debt monetization, is still expected to be a long-term driver for safe-haven assets like gold.

How the Jackson Hole Meeting Changed the Fed’s Policy Stance

Before the Jackson Hole meeting, the Fed was caught in a dilemma: on one side, a weak labor market; on the other, inflation still above target. After cutting rates by 100 basis points in 2024 (including the controversial 50 basis point cut before the election), the Fed held steady in early 2025, angering political leaders at the time.

Powell made a clear policy choice at Jackson Hole—to prioritize controlling inflation over the labor market, announcing that the Fed would resume a rate-cutting cycle. This shift sent a strong signal, which markets immediately interpreted as the result of political pressure. Currency devaluation trades emerged, with precious metals as the core assets of this strategy, leading to significant price increases.

Political Pressure and Public Debt Drive Rate Cut Expectations

Fundamentally, the core factors influencing Fed policy have not changed. U.S. public debt remains high and continues to rise, pushing long-term yields higher. This debt situation exerts increasing political pressure on the Fed, forcing it to balance rate cuts with limiting long-term yields.

Regardless of who becomes the next Fed chair, the expectation of currency devaluation driven by market seeking safe havens in debt monetization will continue to influence policy decisions. Even though the nomination of Kevin Warsh temporarily caused volatility in gold and silver markets, futures market reactions suggest investors expect more rate cuts—an inherently bullish sign for currency devaluation trades.

The Truth Behind the Gold and Silver Plunge: Adjustment, Not Reversal

In early February, during the Asian trading session, precious metals saw a notable correction: spot gold fell nearly 10%, and spot silver dropped about 27%. This decline seemed to signal a reversal in market sentiment, but the reality is more complex.

After last Friday’s silver crash, prices have fallen back to January 9 levels; gold has retreated to around January 20 levels. In other words, this correction merely brought precious metals prices back to a few weeks prior, with minimal impact relative to previous gains. Daily charts clearly show that the recent sharp rise in gold and silver has not been broken, and the pullback is just a normal correction within this upward trend.

Market Reaction After Kevin Warsh’s Appointment

When Trump officially announced the nomination of Kevin Warsh as the new Fed chair, initial market concerns arose. However, the 2-year U.S. Treasury yield trend offers clues: immediately after the announcement, yields began to decline, with a brief rebound that quickly faded after inflation data was released.

This indicates that the market perceives Warsh as likely to maintain a dovish stance on monetary policy. For Warsh himself, the biggest risk is facing a “betrayal” by Trump—similar to what Powell experienced. To avoid this, his best option is to push forward with rate cuts while ensuring political satisfaction.

Currency Devaluation Trades Still Promising

Market expectations are that precious metals prices will rebound quickly like they did after the October dip last year, reaching new highs. Although recent corrections have been significant, from a broader time perspective, they are just short-term adjustments within an upward trend. The logic behind the currency devaluation trade initiated after the Jackson Hole meeting remains intact. The Fed’s long-term easing expectations, debt monetization pressures, and political factors all point toward further gains in safe-haven assets like gold.