Commodities Whipsaw as Fed Chair Nomination Rattles Markets

Remy: Warsh has been nominated as the next Fed Reserve chair by Trump, a longtime critic of QE. Warsh could tighten liquidity and pressure risk assets, including crypto, which have thrived on fed balance sheet growth. Now, precious metals, seeing a sharp pullback overnight and spot gold officially crossed the psychological $5,500 mark yesterday, but it has fallen back this morning and we are looking at it holding the $5,100 level. Meanwhile, silver topped $120 an ounce but then crashed below the $100 level overnight. Now the selloff was driven by profit taking, a stable U.S. currency and Trump's Fed chair pick. Well, joining us this morning to weigh in is Jim Weiderhold, commodity indices product manager at Bloomberg. Jim good morning. Thank you so much for joining us.

Jim: Good morning. Thanks for having me.

Remy: Well a lot going on and obviously a lot moving commodities as well as crypto. So first and foremost give us your take on what this nomination by Trump means for the next fed chair.

Jim: Well, we're uncertain if it's going to actually change a course of fed policy. There's been no moves in the past by Warsh, in different directions that, you know, may or may not play out. So we'll have to see what happens. You know he's only one fed governor. So you know, people are very closely watching the U.S. dollar and rates. And you know, if we continue to see a depreciation in the dollar that that's beneficial to the commodities asset class as a tailwind. Most commodities are priced in U.S. dollars. So as the dollar becomes cheaper that is basically a rising, you know, tie that helps to give a structural floor to the price of most commodities around the world.

Remy: I think it's important to talk about the U.S. currency, given all the undercurrents that are moving commodities as well as other risk assets. So there's been this narrative about the debasement trade. So walk us through this. And what are we actually seeing?

Jim: So the dollar had one of the worst years in depreciation last year, and a lot of that is a seeming rotation out of U.S. assets into things like gold. Gold has been the best beneficiary of that, but also rotation into other places as well as some selling of U.S. treasuries.So, you know, the dollar was in a range for many years. It kind of broke lower past that, that three five year range. So you know, people are concerned about where the direction of the dollar is going here. And, you know, a lot of the emerging market currencies have been beneficiaries of that. So emerging markets had a great year last year as well. And a lot of those are at least slightly tied to commodity production. And they tend to move in correlated patterns with commodities. There was some of a neutral correlation over the last few years, but kind of the traditional moves are coming back into play.

Remy: And then if we think about the first month of 2026, we are finally about to close out the month and head into February next week. But of course, so many fundamentals, right? So many themes, including geopolitics, which you touch upon as well as policy, monetary policy, fiscal policy and technical. So let's start off by zooming in on gold. So we saw the price action yesterday top $5,500. But here we are. We were close to $5,000 earlier today. So give us an idea of what's happening below the surface and why we're seeing these moves and volatility right now.

Jim: So over the last two years, a little over the last two years, gold has had one of the best runs it's ever had. And you know, there could be some profit taking now potentially. But the tailwinds for gold are still in play with you know depreciating dollar the need for a safe haven. People have been diversifying more so in the last year than they have historically. You know people are concerned about the level of, you know, equity markets, the valuation. So people have been diversifying and gold has been the beneficiary of that, along with the massive inflows of investment from across the market participant mix. So central banks have been buying in record numbers over the last few years. We saw retail come in as well. And last year the commodity ETF inflows were more than double what you saw for crypto. So you know commodities are they have that geopolitical risk as well because we have disruptions to supply as well as supply chains with the movements of commodities. So when that happens commodities tend to move higher in price. And we're seeing that now. And yeah another key factor is the weather. So we're getting more extreme cases of extreme heat and extreme cold. We're seeing that now in New York this week and that gas prices have risen pretty dramatically over the last month. think they had the biggest one week move in decades last week as the weather changed.

And you know that that just affects production of all commodities in general because it could disrupt crop production as well as an increased chance of flooding in many of the producing areas that come some of the key metal producing areas We saw flooding of mines and taking off supply right away. And then as that happens, commodities move, you know, in correlation to what happens when these geopolitical issues and weather issues disrupt commodity production.

Remy: Yeah. And indeed there are so many moving parts here. But you touched on crypto. And on this Friday morning we are looking at Bitcoin hovering right around $82K. But that's quite the drop given that we saw price action above $90,000. So what is actually happening. I know you touched on ETF flows and that is something that is key to watch and compare. Especially when we're talking about gold versus bitcoin.

Jim: So Bitcoin and gold surprisingly right now they have about the same volatility. The 30 day historical volatility for gold. And Bitcoin is right around 30 right now. Historically you don't see that. Bitcoin volatility has been coming down over the last few years as institutional adoption has picked up. 2024 was a great year for the asset class in terms of inflows into the asset class, and then that is completely reversed in 2025 and we're seeing that spill into 2026 as well.

So I just looked at as of yesterday, the inflows into commodity ETFs were about another 12 billion on top of the 100 billion or so from last year. And crypto is flat this year. So there's clearly a focus more so on the asset class as opposed to crypto at this point. But you know the crypto trades over many years cycles even though it has a short history. So we'll see if it starts to get back in the market participants favor after this big run-up in commodity prices.

Remy: And finally, before I let you go, you touched upon that gas. And another area we're paying attention to when it comes to commodities is Brent as well as WTI. Given the geopolitical situation in the Middle East, but where do you see energy going as we head into 2026 and why? Jim:Yeah.

So energy in general has been on a deflationary downtrend for the last year or two. And, you know, people have been positioned that way because there's expectations for a huge supply glut of oil. But, you know, to start the year, most of these are up at least 10% for 2026, so far. And that's basically the geopolitical risk, you know. So there's always a potential for a news headline to come out which could immediately disrupt supply. So energy is typically the most volatile of all the commodity sectors out there. Uh, nat gas is the most volatile. And we saw that play out already. So yeah, it's clearly this last year, this decade, the 2020s has been a time I talk about this in my outlook that geopolitical tensions have risen dramatically. We see consistent episodes of it. And when that happens, commodity prices tend to spike higher because of the potential disruption to supply. Yeah. And it's really interesting because when we look at the S&P 500 and the outperformance of the energy sector compared to, say, what we saw last year in IT or communication services. That's an interesting area to watch. So do you think we'll see more of the same?

Jim: Potentially? I mean, we're only one year, one month into the year, so it's hard to see. I don't forecast anything. But yeah I mean we're seeing the Bloomberg Commodity Index, BCOM, which tracks the most major traded metals in the world. That's up 10% on the year. And a lot of it is not only the precious metals performance but energy for now. And there's some correlations between, you know, the commodity producing companies versus the underlying raw materials. But you know, the equities have that equity beta risk as well. So commodities have more of that direct exposure to the commodity basically.

Remy: Well Jim we will have to leave it there for today. But thank you so much for joining me. And thank you so much for sharing all of your insights. Of course.

Jim: Thank you so much for having me.