Silver fell sharply, at one point erasing its two-day rebound, as the white metal struggled to find a floor following a historic market rout.
Spot silver plunged by as much as 17% toward $73 an ounce during Asian trading before trimming losses to about 11% by mid-morning in Europe, News.Az reports, citing Bloomberg.
After a record-breaking rally that appeared to overheat, the metal has retreated by more than a third from last week’s all-time high. A rebound in the dollar last week triggered the unwinding of bullish positions and weighed broadly on commodities.
Precious metals have surged over the past year, driven by speculative momentum in China, geopolitical turmoil and concerns about the independence of the US central bank. That rally came to an abrupt halt at the end of last week, with silver suffering its biggest-ever single-day drop on Friday and gold posting its steepest fall since 2013.
The sudden decline also hit sentiment across base metals, with copper falling as much as 1.5% to slip below $13,000 a ton. Spot gold, meanwhile, dropped by as much as 3.5% in volatile trading.
Investors had accumulated large positions in precious metals throughout January, including via inflows into leveraged exchange-traded products and heavy call-options buying. When prices began falling during Asian trading hours on Friday, it triggered a wave of selling that carried into the early part of this week, leaving markets exceptionally volatile.
Silver has historically been more volatile than gold due to its smaller market size. Even so, recent price swings have stood out for their magnitude and speed, amplified by heavy speculative inflows and thinner liquidity in the over-the-counter market.
The turbulence has made trading more difficult for banks that dominate London’s over-the-counter spot market, as holding long or short positions—even briefly—has become increasingly risky. Traders said higher prices have also strained the availability of credit allocated to precious metals desks. Reduced liquidity, in turn, has fed further volatility and magnified the impact of derivatives trading on prices.
