Gold prices fell Friday, briefly dropping below $5,000/oz, after U.S. President Donald Trump signaled he will announce his nominee for the next Federal Reserve Chair later in the day, helping the dollar surge higher.

At 05:40 ET (10:40 GMT), Spot gold slid 5.5% to $5,076.18 an ounce, briefly falling below $5,000/oz to a low of $4,941.79, while gold futures for April fell 4.7% to $5,104.31/oz.

"In this environment, gold is increasingly being used as a source of liquidity rather than a traditional safe-haven asset," said analysts at ING, in a note.

But prices still remained on course for a stellar January, gaining around 16%, after hitting a series of record highs in the month.  

Trump to announce Fed Chair nominee on Friday; Warsh seen in the lead

Trump told reporters on Thursday evening that he will announce his nomination for the next Federal Reserve Chair on Friday morning. 

Several reports said that Trump will nominate Kevin Warsh for the role, with Trump’s comments to reporters also suggesting that the former Fed governor was in the lead. 

"A lot of people think that this is somebody that could have been there a few years ago,” Trump told reporters on Thursday. 

Warsh -- who had lost out to Powell for the top Fed role in 2017-- has largely supported Trump’s calls for more aggressive interest rate cuts by the Fed, but is also considered to be one of the less radical choices among the various candidates that have publicly suggested for the role.

“Warsh has been amongst the most market-friendly candidates, as he is a former Fed governor with a history of hawkish views, especially on balance sheet reduction,” said ING.

“Given how adamant Trump has been on reducing rates, it’s safe to assume Warsh has taken a more dovish stance during the interview process – but this pick may suggest a desire to calm speculation on Fed independence loss.”

There has been growing market uncertainty over the independence of the Fed, amid repeated calls from Trump that the central bank cut interest rates sharply. 

Trump’s announcement on Friday is expected to clear out a major point of uncertainty for markets -- a trend that could sap gold of some safe haven demand.

Gold adds about 20% in January, silver leads metal gains 

Despite Friday’s steep losses, spot gold was trading up about 17% in January, while other precious metals were also set for strong gains. 

The yellow metal headlined a rush into safe havens, as heightened global geopolitical tensions, especially between the U.S. and other world powers, ramped up haven demand for metals and physical assets. 

A sharp drop in the dollar, amid growing uncertainty over U.S. fiscal health and the Fed also benefited metal markets, as did uncertainty over U.S. interest rates. 

Silver, platinum, and palladium prices were also swept up in metal buying, with silver being the standout performer in January. The white metal was set to add more than 40% this month. 

Platinum was trading up about 11%, while palladium was up nearly 18%.