Gold Silver Down From All Time High : The price of silver has taken a huge hit from historic highs. On Monday, the price of 1 kg of silver has increased to Rs 2,37,000 per kg in the jewelry market of Ahmedabad. The previous day, the price of 1 kg of silver reached a record high of Rs 2,52,000. Gold also fell from all-time highs along with silver. Investors are confused by the big fall in gold and silver from historic highs.
Biggest crash in 5 years in silver
According to a Bloomberg report, both precious metals hit record highs following a historic rally at the end of the year. While many traders decided to book profits, on the other hand price volatility intensified due to New Year holiday low trading activity in global markets. Gold prices fell nearly 5 percent in a day, the biggest one-day decline since October 21. Silver prices fell by around 11%, the biggest intraday loss since September 2020.
Globally, New York gold was trading 4.2 percent lower at $4,343.38 an ounce by midday. Shares of major gold miners also fell. Shares of Newmont, Barrick Mining and Agnico Eagle Mines were down 6 percent.
Silver fell 8.5 percent to $72.58 an ounce, after hitting a record high of $84.01. Platinum saw a sharp decline of 14%, while palladium fell by around 16%. The decline in both metals was the biggest intraday decline since 2020.
Despite this sharp decline, silver is still showing a record-breaking surge of nearly 140 percent this year. This is the reason that now a big question has arisen in front of the investors that in which direction will the price of silver go now?
Market signals were already warning that silver prices had risen more than needed. Silver prices have increased by more than 25 percent since mid-December. Its Momentum Indicator remained above the 70 level, an indication that many investors entered the market following the historic rally in silver. This new rally comes just two months after the London silver market experienced a severe “squeeze”. During that period, heavy buying in ETFs and exports to India further reduced the already depleted inventories.
Along with the price drop, the world’s largest physical silver ETF, iShares Silver Trust, also fell nearly 10%. This was the biggest decline since 2020, according to Bloomberg.
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Silver is moving in the footsteps of gold?
Demand for the precious metal has remained strong this year as the weakening US dollar and the rise of tensions in business relations around the world following the arrival of President Donald Trump. Many investors believe that when the price of gold rises, silver moves with it. Some traders also monitor the gold-to-silver ratio. Earlier this year, the ratio rose above 100, which many saw as a sign to buy silver.
Massive buying of silver in China
When the price of silver crossed the level of 84 dollars per ounce, then suddenly the price of silver fell. The main reason for this boom was heavy buying in China. Strong demand from Chinese investors boosted prices and premiums reached record levels in Shanghai.
Spot silver prices in Shanghai were quoted at over $8 an ounce higher than in London, the biggest difference ever. Wang Yanqing, an analyst at China Futures Ltd., said speculation has reached an extreme level. “The betting environment is very strong,” Wang told Bloomberg. There is a lot of news about supply shortages, which has fueled price growth.”
Invest heavily in silver ETFs
Silver-backed exchange-traded funds (ETFs) have also seen massive inflows this year. According to Bloomberg, these funds have added more than 150 million ounces of silver.
However, the holdings are still below the all-time high seen during the retail trading boom of 2021. But this continuous infall has reduced the amount of silver available in the market. ETF holdings have increased nearly every month this year, according to Bloomberg data.
Measures taken by exchanges to reduce speculation
Some exchanges are intervening to control the risk. CME Group said margins on some Comex silver futures contracts have been increased since Monday. When margin increases, traders have to invest more to keep their positions open. Traders who cannot do this are forced to reduce or close their trades. Analysts say the decision could slow down speculation.
Silver prices will continue to rise due to speculative trading
There are many indications of silver price increase. Many traders are buying call options, a popular way to bet on higher prices. The largest silver ETF, the iShares Silver Trust, has now reached its highest level since 2021.
However, the London vault has some supply after 2021. But most of the world’s available silver is still held in New York. Traders are awaiting the outcome of a US investigation that could lead to tariffs or other trade restrictions.
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pressure on silver
Citing market strategists, Bloomberg says the unusual volatility in silver prices signals a bigger problem in the current market. Brendan Fagan, macro strategist at Markets Live, said the sharp rise and sudden drop in silver shows how much supply is under pressure. He pointed out that with the New Year approaching, China has now become a major pressure point. At the moment, silver is caught between strong demand, limited supply and a fast-growing market.