Silver’s correction was far more violent than gold’s. After reaching historic highs, silver fell by 42%, while gold dropped by 17%. Silver became the victim of the largest one-day sell-off in the history of its price quotations.
Silver surged to record levels of USD 121 per ounce, only to slide to around USD 70 per ounce on futures contracts. Gold peaked at USD 5,623 and then fell to USD 4,684. Silver’s decline lasted three days longer than gold’s, and in percentage terms the drop in silver was much deeper. While gold has started to rebound, the same cannot yet be said for silver.
“Silver had been overheated for quite some time, and that was the result of speculation,” Michał Stajniak, Deputy Director of the Analysis Department at XTB, told MarketNews24. “And it’s possible this isn’t the end of it, because the price gap between the world’s largest commodity exchange specializing in futures trading—between COMEX and Shanghai—was large, reaching at one point nearly USD 50 per ounce.”
Negative sentiment dominates the precious metals market, accompanied by high day-to-day volatility. On 11 February, gold was down around 1%, hovering near USD 5,000 per ounce. Silver fell by more than 3%, testing the USD 80 per ounce level. Palladium and platinum moved similarly, each down about 1.6%. Again, silver’s downward move lasted three days longer than gold’s.
The sharp one-session declines in gold and silver—exceeding 10%—were linked to signs of reduced risk appetite and a rebound in the U.S. dollar. When the dollar strengthens and U.S. Treasury yields rise, the opportunity cost of holding non-yielding bullion becomes too high for many investors.
“Silver became the victim of the largest one-day drop in its entire trading history. Even during the massive silver speculation episode in the United States in the 1980s, we didn’t see declines of this scale,” the XTB expert added.
In the second half of February, silver started the period about USD 7 above its low, while gold recovered by USD 344—meaning only a modest portion of the losses has been recouped so far.
Measured from the start of the year, however, both metals are still in positive territory: silver is up 9% and gold is up 16%. The outlook for silver appears considerably more complex than for gold, because silver demand has both an investment and an industrial component.
For silver, industrial demand accounts for more than 50% of total demand. The substantial premium paid in Shanghai compared with New York and London reflects exceptionally strong industrial demand in China, where over 80% of the world’s photovoltaic panel production is concentrated.
There is also speculation about whether investors will want to close their March futures positions and take physical delivery. The COMEX market, however, is largely a “paper” market, and investors who were considering taking delivery were thinking in those terms when silver was trading around USD 120 per ounce, not at prices USD 50 lower.
Despite the recent correction, gold may still set new all-time highs this year—something that appears far less likely for silver.
“If silver were to move toward USD 120–150 per ounce, industrial demand would likely be replaced by other technologies and other metals. In photovoltaic panels, for example, it may be possible to substitute silver with copper,” the XTB analyst assessed. “Silver was extremely overbought compared with gold, and although people say silver follows gold, setting new records in silver will be much harder. It’s possible, but uncertain—and it’s unclear when we might see it.”
