A dramatic selloff gripped the precious metals sector on Friday, with silver prices experiencing one of their most severe single-day declines in history. The catalyst was a surprise announcement from Washington regarding the leadership of the U.S. Federal Reserve.
Precipitous Decline
After reaching an all-time high above $120 per ounce on Thursday, the silver market collapsed. At its lowest point during Friday’s session, the price plummeted to $76.50, representing a staggering intraday drop of 30 to 34 percent. Trading closed at $85.14, marking a loss of over 26 percent from the previous day’s close.
The sharp correction was not isolated to silver. Gold also came under significant pressure, with its price falling below $5,000 at times. The sector-wide rout heavily impacted mining equities. Shares of companies like Coeur Mining plummeted, recording double-digit losses of 14 percent. Despite the historic crash, silver’s year-to-date performance remains in positive territory.
The Trigger: A Hawkish Nomination
The selloff was triggered by former President Donald Trump’s nomination of Kevin Warsh to succeed Jerome Powell as Chair of the Federal Reserve. Financial markets perceive Warsh as a monetary policy “hawk,” known for his strong advocacy of strict price stability.
This development prompted an immediate and fundamental reassessment across commodity markets. The so-called “debasement trade”—a prolonged bet on the continuous devaluation of fiat currencies—was abruptly upended. Investors began pricing in the prospect of a more robust and politically independent Fed. Consequently, the U.S. dollar gained strength, while tangible assets faced intense selling pressure.
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Technical Conditions Ripe for a Correction
Analysts note that the technical backdrop was already primed for a significant pullback. Prior to the crash, the Relative Strength Index (RSI) had reached levels around 90, indicating an extremely overbought market. The news regarding the Fed nomination acted as the catalyst for a wave of profit-taking that many considered overdue.
Physical Market Tells a Different Story
In a stark contrast to the paper markets, reports from physical bullion dealers indicate robust underlying demand. Swiss dealer Philoro reported a January sales increase of 374 percent compared to the previous year. Supply chain constraints and delivery bottlenecks are reported to persist.
Industry data from The Silver Institute points to a structural supply deficit, now in its fifth consecutive year. This growing disconnect between the paper and physical markets could have profound implications for long-term price discovery.
Market participants are now watching to see if a price floor will form around the $80 level in the coming trading sessions, or if leveraged positions will force further liquidation and selling pressure.
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