Silver is recovering after its strongest intraday reversal since the financial crisis in 2008. The metal is now rising above $110 after falling more than 7% from the record price of over $117 on Monday.
The severe volatility in precious metals reflects a broader crisis of confidence in fiat currencies and government debt. As gold broke $5,000, and silver experienced its strongest fluctuations in 17 years, the markets signal great uncertainty about the financial sustainability of the largest economies — a sentiment that could spread to other risky assets, including cryptocurrencies.
Record rise meets significant reversal
The white metal experienced the largest intraday increase since the global financial crisis and rose 14% before most gains were lost again at the end of U.S. trading. After finding support near $103, silver has climbed back above $110, where losses are now reduced to below 5%, after Asian buyers came into play.
Gold also fell back after hitting $5,111.07 and stabilized around $5,100.
Trading with depreciation drives increase
The rise in precious metals reflects growing flight from currencies and government bonds among investors reacting to increasing fiscal policy concerns. The massive sell-off in the Japanese bond market last week underscored the rising skepticism towards large public spending in developed economies.
Max Belmont from First Eagle Investment Management noted that gold historically acts as a benchmark for market concerns. It protects against unexpected inflation figures, sudden market drops, and geopolitical tensions.
The dollar index has fallen nearly 2% over six trading days amid speculation that the U.S. will help Japan support the yen. This raises concerns about central bank independence and the unpredictable line of the Trump administration.
Technical warnings arise
Despite the historic rises, Heraeus Precious Metals warns that the increase may have gone too far. They point to technical indicators showing overbought conditions and a compressed gold-silver ratio that now stands at 50 to 100 compared to a year ago.
Claudio Wewel from J. Safra Sarasin warned that silver typically falls more than gold after prolonged price rises due to its higher volatility. He believes that the risk-reward ratio could worsen if momentum is lost.
Important levels to follow
Silver's ability to stay above $110 will be crucial for the short-term direction. A rebound towards Monday's closing price of $115.50 could create a narrative of a V-shaped rebound, while a fall below $105 would signal a deeper correction ahead.
Markets are now awaiting Trump's nomination for central bank chairman and this week's FOMC decision, where the central bank is expected to pause interest rate cuts.
