The silver market has entered a period of exceptional turmoil, highlighted by a historic reversal that erased weeks of speculative gains and left investors reeling. On Thursday, spot silver prices plunged as much as 18%, briefly dropping below $73 an ounce. This dramatic selloff has effectively wiped out the white metal’s two-day recovery, dragging it more than a third off its record highs reached just last week.
The violent retreat is part of a broader correction in precious metals, following a speculative surge that saw both silver and gold explode to unprecedented levels on the back of geopolitical instability, Chinese investor demand, and macroeconomic concerns, particularly surrounding the independence of the U.S. Federal Reserve.
The latest rally in precious metals, and particularly silver, was supercharged by a wave of speculative buying in China. From retail investors to large equity funds, Chinese traders poured money into silver via commodities markets and exchange-traded products (ETPs) over recent months. This demand sent silver to as high as $121.65 in January, a parabolic move that raised alarm bells across financial markets.
Analysts at Sucden Financial noted that silver has moved away from its physical fundamentals and entered a “highly flow-driven phase,” with price action increasingly driven by speculative and commodity trading advisor (CTA) positioning. Ross Norman, CEO of Metals Daily, was even more blunt, describing the phenomenon as detached from reality: “Volatility in precious metals has become self-sustaining, removed from the real market and its drivers.”Adding fuel to the fire was an extraordinary premium on China’s only pure-play silver fund, which led the issuer to repeatedly warn investors about mounting risks and eventually halt further subscriptions.
After touching its all-time high just days ago, the silver market has seen its sharpest movements since 1980. On Friday last week, silver posted its largest daily drop ever; gold also saw its worst performance since 2013. By Thursday of this week, the bearish momentum showed no signs of stopping: March silver futures dropped $8.41 to $75.90, erasing nearly all gains from earlier in the week.
This unprecedented volatility has shattered market sentiment and left silver vulnerable to sharp corrections.“Despite ongoing structural tightness in the silver market, the high beta environment has magnified price swings,” Sucden analysts explained. “Volatility is likely to remain pronounced, with upside dependent on renewed inflows and downside limited but uneven as positioning shifts continue to drive exaggerated moves.”
The turmoil hasn’t stayed confined to precious metals. Copper, another major industrial commodity, fell below $13,000 a ton, down more than 2% on the day, while gold also faced significant pressure, dropping as much as 3.5% in spot trading. According to Kitco News, April gold futures recently fell $69.40 to $4,880.80.Part of the pressure stems from macroeconomic shifts. The U.S. dollar index has rebounded to a two-week high, powered by stronger-than-expected economic data and the nomination of Kevin Warsh, known for his hawkish stance, as the next Federal Reserve Chair. Meanwhile, falling oil prices have further weakened inflationary momentum, reducing the appeal of inflation-hedging assets such as gold and silver.
Meanwhile, crude prices fell nearly 4% after Iran confirmed it would engage in diplomatic talks with the U.S., easing concerns about immediate geopolitical escalation in the Middle East. Brent crude dipped toward $68 a barrel, and West Texas Intermediate hovered near $64.
Mike McGlone, senior market strategist at Bloomberg Intelligence, believes that metals may have peaked this cycle. While acknowledging that momentum could push gold to $6,000 per ounce, McGlone says a reversion to $4,000 is more realistic given overbought conditions and stretched valuations.
Silver, similarly, may revisit its recent $121.65 high, but McGlone argues that a pullback toward $50 represents a more sustainable price level. He called attention to the unsustainable nature of the gold/silver ratio staying below 50 for long; it currently stands around 56.6, reflecting gold’s relative outperformance during the correction.“There’s a good chance that what we’re seeing is the end of a parabolic rally,” McGlone wrote. “The risk/reward balance at these levels favors caution.”
Heightened volatility has raised concerns among institutional players. According to traders, many banks are struggling to manage positions in this turbulent environment. With soaring prices edging close to credit limits and thinning liquidity in over-the-counter markets, institutions are increasingly stepping back just as retail investors are getting their fingers burned.“Before long, the bullion trading landscape looks utterly desolate like a moon-scape,” Norman warned. “It feels more like a casino than a marketplace.”
As silver undergoes its steepest correction in decades, markets find themselves at a critical turning point. The excessive speculative froth that pushed prices to unsustainable highs has now become a liability, and risk-off sentiment is rapidly taking over. With technical patterns pointing to further downside and external factors such as a strong dollar and easing geopolitical tensions weighing in, silver’s path forward looks more treacherous than ever.
Investors and traders now face a market that is decoupled from fundamentals, prone to wild swings, and driven by sentiment, liquidity, and leverage rather than by supply-and-demand dynamics. The legacy of 2026’s silver rally may not be one of lasting returns, but of a cautionary tale for markets running too hot, too fast.