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Gold Falls as Trump Hesitates on Hassett as Fed Chair Pick

(Bloomberg) -- Gold slipped the most in more than two weeks after US President Donald Trump expressed reluctance about nominating Kevin Hassett as Federal Reserve chair, casting further doubt over his search for the next head of the central bank.

Trump on Friday said if Hassett were to leave his post as director of the National Economic Council, it would deprive the administration of one of its most powerful messengers on the economy. Hassett has been seen as a top dovish contender to succeed Fed Chair Jerome Powell.

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The dollar pared losses after Trump’s remarks while Treasury yields advanced, sending bullion lower by as much as 1.7%. Swap traders priced in slightly lower odds of two quarter-point rate cuts by the Fed this year after Trump’s comment on Hassett.

Gold has extended its 2025 rally into the start of this year, driven partly by renewed attacks on the Fed’s independence by the White House as well as expectations of monetary easing.

Further uncertainty over the new monetary chief will likely keep the precious metal well-supported, but at the same time, concerns that the Fed may not lower borrowing costs as much as markets expected are weighing on non-yielding gold. Hassett is widely seen to keep monetary policy accommodative if he was picked to become the new Fed Chair. Meanwhile, speculation mounted that former Fed Governor Kevin Warsh is another front runner for the position. Warsh is known for his hawkish stance on monetary policy.

After inflation and unemployment data released in recent days, several Federal Reserve officials signaled a willingness to pause rate cuts at their upcoming policy meeting, citing a labor market that appears to be stabilizing and ongoing inflation pressures. Five presidents of regional Fed banks indicated the US central bank is now well positioned to wait for more data before acting again.

Silver slipped as a Chinese exchange cut position limits and authorities there clamped down on high-frequency trading, cooling sentiment in mainland futures that had helped push global prices to a record.

Spot silver fell as much as 6% after a modest decline in the previous session. Regulators ordered bourses including the Shanghai Futures Exchange — the main metals platform — to remove servers operated by high-frequency traders from their data centers, according to people familiar with the matter. SHFE also lowered the maximum number of intraday opening positions for silver futures, after a bout of exceptional volatility.

While silver has been a hot topic among investors lately on Western social media, “it’s really speculators in China that have been the main engine,” said Ole Hansen, head of commodity strategy at Saxo Bank AS. “We see that through exploding trade volumes in industrial metals and the elevated premium traders there are prepared to pay for silver over London.”

Silver is still up 12% this week, but began to pare gains after Washington on Wednesday refrained from putting import tariffs on critical minerals. The threat of levies on minerals including silver and platinum had been one among several drivers of a breakneck rally, but Trump stopped short of imposing sweeping duties, while not ruling out doing so in future.

Still, the unpredictable nature of Trump’s policymaking “suggests that the practice of keeping metal onshore in the US to back short futures positions is likely to persist,” consultancy Metals Focus said in a note.

Gold fell to $ an ounce as of in New York. Silver slipped to $. Both platinum and palladium dropped. The Bloomberg Dollar Spot Index was steady.

--With assistance from Yihui Xie and Jack Ryan.