Quick overview

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Silver lurched between gains and losses caused by weak liquidity, falling almost 10% before rising again.

 

Spot silver had risen 4% to nearly $74 an ounce after plunging toward $64. All of the metal’s gains from a spectacular rally last month were erased by a 20 percent drop in the previous session. Following an earlier retreat, gold also made progress.

Its price swings have historically been more severe because silver has a smaller market and less liquidity than gold.

However, recent movements—the most erratic since 1980—have been notable for their magnitude and velocity, exacerbated by speculative momentum and a decline in over-the-counter trading. Since reaching its highest point ever on January 29, white metal has dropped by more than a third.

Last month, a multiyear bull run for precious metals picked up speed, supported by increased geopolitical risks, worries about the independence of the Federal Reserve, and speculative purchasing in China.

Investors piled into call options and leveraged exchange-traded products, building up sizable positions in precious metals. With gold plunging the most since 2013 and silver experiencing its largest-ever daily decline on January 30, that rally came to an abrupt end at the end of last week. Since then, markets have been incredibly erratic.

Silver has had difficulty finding support due to a significant decline in Chinese purchases during the last week.

Violent market movements have deterred buyers, and prices in the nation have dropped to a discount compared to global standards. Positions are being closed as open interest on the Shanghai Futures Exchange dropped to its lowest level in over four years.