Silver prices fall by a record 30% as the market goes crazy
The price of silver dropped to under $80 an ounce on
Monday in what was its biggest one-day fall for more than ten years, and left
traders dumbfounded after it had reached all-time highs above $115 just a week
ago.
The dramatic selloff came amid intense profit-taking,
rising bond yields, and a strengthening U. S. dollar, all of which triggered a
mass exodus from commodities. Analysts say the drop reflects a sharp correction
following weeks of speculative buying that had driven silver to its highest
levels in history.
Profit-Taking and Market Fear Trigger Massive
Selloff
Traders had been warning that silver’s rapid rise
was unsustainable, with prices outpacing fundamentals like industrial demand
and physical supply constraints. As U. S. Treasury yields climbed and inflation
expectations moderated, investors rushed to unwind leveraged positions in
metals, causing a chain reaction across global commodity exchanges.
One analyst from New York said that the 30% fall
experienced by silver in one day is not just a correction but rather a wake-up
call. “After such an aggressive rally, the market simply ran out of buyers.”
The Commodity Futures Trading Commission (CFTC)
reported unusually high margin calls overnight, prompting many retail traders
to liquidate their holdings. This cascade effect amplified the downward spiral,
driving prices from $114 early in the day to as low as $78. 60 per ounce by
market close.
Strong Dollar and Rate Fears Weigh on Metals
The crash was driven by a number of factors
including the strengthening US dollar which hit a six month high following data
showing continued growth and employment within the country. This selloff was
also fueled by increasing belief among investors that the Federal Reserve might
postpone any future interest rate cuts.
Higher interest rates typically hurt precious metals
like silver and gold, which offer no yield and therefore become less attractive
when real returns on bonds increase.
Investors Reassess the Silver Outlook
Although analysts believe that there are strong
reasons why silver should be doing well in the long term such as its importance
for renewable energy, electric cars and industry, they expect there will be
continued instability for now as people try to work out if they should be more
worried about the world economy or central banks tightening up too much.
Support levels around $75 are now being identified
by market strategists; however, they caution that renewed volatility may
challenge silver’s strength over the next few weeks.
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