After a sustained period of rally, Silver suffered its biggest drop of 30% in 46 years since 1980. Gold’s and silver’s plunge on Friday was the metals’ worst daily drop, settling at $83.45 an ounce on COMEX. Moreover, the Silver-backed iShares Silver Trust (SLV) price also fell by 27% on Friday. The sharp moves down were initially triggered by US President Donald Trump’s nomination of Kevin Warsh as the next Federal Reserve chair, as it fueled a recovery in the US dollar. This made metals more expensive for foreign investors to buy gold and silver, spoiling the theory that metals would be able to replace the greenback as the global reserve currency.
What Triggered the ‘Bearish Moment’
Today, the silver price is $85.188, while the price last settled at a record high on Monday at $115.504, up over 11% for the month. Previously, the greenback undercut sentiment among investors who piled into metals after the president signalled a willingness to let the currency weaken. This demand for precious metals among investors had surged record after record, shocking seasoned traders and driving exceptional price volatility. For this very reason, some analysts expected the plunge on Friday, Michael Brown, senior research strategist at Pepperstone, noted this week, already signaled that things would become downright disorderly.
OrbitBrief, an X account post on X, stated that a single Fed nomination has turned a technical Washington job into a high-stakes fight over power, independence, and the future of the US economy.
National Economic Council Director Kevin Hassett was the favourite of many to replace Jerome Powell. Trump’s pick, Warsh, is a well-known critic of the US central bank and easy money. He was more aligned with the policy stances that focused on curbing inflation, which could raise interest rates. Additionally, a few analysts opined that Warsh would be less supportive of lower interest rates compared to other potential candidates for the role. Thus, many investors tried to lock in their profit. Following Trump’s announcement, the dollar index, which touched a 4-year low earlier this week, rose to 0.9% on Friday.
The Future Outlook of Silver
The reaction of precious metals was especially dramatic. Jeff deGraaf, chairman and head of technical research at Renaissance Macro Research, responded to the reaction of precious metals and noted that “Parabolic moves have hair triggers, and those hair triggers can go off at any point in time, and that’s why they’re so dangerous and so susceptible to these mass changes in psychology. They really have nothing to do with the fundamentals.”
However, some analysts are still advising investors that they still have time to invest and buy the metal despite the volatility and the rally going too far too quickly. Moreover, although the volatility remains and is predicted to sustain for a while, the underlying fundamentals, such as the industrial demand, supply deficits, and Silver’s status as a critical mineral, are still seen as supportive for long-term prices. Vice president of product development at Amplify ETFs noted that the white metal still has a lot of benefits, from being a safe-haven and store of value with flows similar to gold to growing industrial demand that can have a future deficit in global supply.
