Causes of Silver Price Drop ($XAG ) Free Fall After Establishing All-Time High?
Below are the main reasons leading to this significant decline:
1. Nomination of a new Fed Chair and the recovery of the USD: President Donald Trump's nomination of Kevin Warsh as the Chair of the Federal Reserve (Fed) to replace Jerome Powell is the primary "trigger". The market views Warsh as having a "hawkish" stance (favoring high interest rates), causing the USD to strengthen significantly. As the USD rises, commodities priced in this currency, such as silver, become expensive and face sell-offs.
2. Profit-taking pressure after the hot rally: In January 2026 alone, silver surged by 40-70%. This rapid growth has put the market in a state of "overheating" (frothy). When negative news appears, investors collectively take profits to secure gains, creating a domino effect of sell-offs.
3. Political risk cools down: The U.S. Congress reaching a preliminary agreement to avoid a government shutdown has reduced the demand for safe-haven investments in precious metals.
4. The resonance from gold prices: Gold also experienced its largest drop in decades as it fell from its peak of 5,600 USD. With its more volatile nature compared to gold, silver has been dragged down further in the wave of capital withdrawal from the precious metals group.
Despite the significant drop, many experts believe this is a necessary technical correction after a "bubble"-like growth phase.
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