Silver prices experienced a dramatic reversal on Thursday, , wiping out two days of gains following a historic market rout. The precious metal plunged as much as 17% during Asian trading hours, struggling to find a price floor after a period of intense volatility. Gold also declined, falling as much as 3.5% in choppy trading.
The sharp decline in silver follows a record-breaking rally that saw the metal retreat by more than a third from its all-time high reached on . Spot silver briefly recovered above $90 an ounce earlier in the day before the sell-off accelerated, ultimately settling at $76.99 as of 12:19 p.m. In Singapore. Spot gold decreased to $4,881.35.
The recent volatility in precious metals markets has been attributed to a number of factors, including speculative momentum, geopolitical tensions, and concerns surrounding the independence of the US central bank. Last month’s surge in prices was fueled by these elements, but the rally abruptly halted at the end of last week, with silver experiencing its largest ever daily drop on Friday and gold suffering its biggest decline since 2013.
Christopher Wong, a strategist at Oversea-Chinese Banking Corp, noted that “sentiment seems to have turned soggy across most asset classes, including regional equities and metals,” creating a “feedback loop amid thin market liquidity.” This suggests that the decline is being exacerbated by a lack of buyers in the market, leading to further selling pressure.
The downturn in precious metals also weighed on base metals markets, with copper falling more than 1% to slip below $13,000 a ton. This indicates a broader risk-off sentiment across commodity markets, as investors move to reduce their exposure to perceived riskier assets.
Investors had built up substantial positions in precious metals in recent weeks, further amplified by significant inflows into leveraged exchange-traded products and a surge in call-options buying. The unwinding of these positions is likely contributing to the current sell-off, as traders seek to reduce their risk exposure.
Market participants are also closely watching the potential implications of Kevin Warsh’s nomination as Federal Reserve chair. President Donald Trump indicated on Wednesday that he would not have nominated Warsh had he signaled an intention to raise interest rates. Trump expressed confidence that the Fed would lower rates again, a development that would typically be supportive of precious metals, which do not offer a yield.
Analysts at Standard Chartered Plc suggest that gold prices are “likely to remain volatile until there is greater certainty on the monetary policy outlook.” They anticipate potential further volatility as investors redeem holdings in exchange-traded products, but maintain a long-term positive outlook, believing that “structural drivers remain intact and we continue to expect a rebuild to the upside.”
Silver, traditionally more volatile than gold due to its smaller market size and lower liquidity, has experienced particularly pronounced swings. Bloomberg strategists highlight a key support level for silver just above $71, noting that a break below $70 could deepen risk aversion across assets.
The recent price action underscores the inherent risks associated with speculative trading in precious metals. While the underlying fundamentals – geopolitical uncertainty and potential for interest rate cuts – remain supportive, the market is susceptible to rapid shifts in sentiment and liquidity conditions. The dramatic reversal highlights the importance of careful risk management and a thorough understanding of market dynamics.
The situation remains fluid, and further volatility is expected until there is greater clarity on the direction of monetary policy and a stabilization of market sentiment. Investors are advised to exercise caution and closely monitor developments in the coming days, and weeks.
