Gold and silver prices fell on Monday after a strong year-end rally pushed both metals to record highs, Bloomberg reported. Many traders decided to book profits, and thin holiday trading made the price swings sharper. Gold dropped as much as 5% during the day, its biggest one-day fall since October 21. Silver, on the other hand, crashed as much as 11%, its biggest intraday drop since September 2020.
By mid-afternoon in New York, gold was down 4.2% at $4,343.38 an ounce. Shares of major gold miners also fell, with Newmont, Barrick Mining and Agnico Eagle Mines dropping more than 6%.
Silver was down 8.5% at $72.58 an ounce after touching a record of $84.01 earlier in the day. Platinum plunged 14%, while palladium fell nearly 16%, both seeing their worst intraday drops since 2020. Despite the crash, silver is still up about 140% this year. That has left investors asking one big question — where does silver go from here?
Silver crashes: Technical signals warned of a pullback
Market indicators had already warned that prices were overheated. Since mid-December, silver had jumped more than 25%. Its momentum indicator stayed well above 70, a level that suggests too many investors rushed in too quickly. This latest rally came just two months after the London silver market went through a severe squeeze. At that time, strong ETF buying and exports to India drained already low inventories.
As prices fell, the iShares Silver Trust, the world’s largest physically backed silver ETF, dropped as much as 10%, its biggest fall since 2020, according to Bloomberg.
Silver follows Gold’s lead
Precious metals have seen strong demand this year as the US dollar weakened and global trade tensions rose under President Donald Trump. Many investors believe that when gold rises, silver follows. Some traders also watch the gold-to-silver price ratio. Earlier this year, that ratio climbed above 100, which many saw as a signal to buy silver.
China’s buying spree fueled the silver spike
Silver’s dramatic fall came just hours after it surged past $84 an ounce, driven primarily by heavy buying in China. Strong demand from Chinese investors pushed prices higher and sent premiums in Shanghai soaring.
Spot silver in Shanghai traded more than $8 an ounce above London prices, the widest gap ever recorded. Wang Yanqing, an analyst at China Futures Ltd., said speculation had reached extreme levels. “The speculative atmosphere is very strong,” Wang told Bloomberg. “There’s hype around tight supply, and it’s gone a bit too far.”
Money keeps flowing into Silver ETFs
Silver-backed exchange-traded funds have also seen huge inflows this year. More than 150 million ounces of silver have been added to these funds, according to Bloomberg.
Even though holdings are still below the peak seen during the 2021 retail trading boom, the steady inflow has reduced the amount of silver available in the market. According to Bloomberg data, ETF holdings rose in almost every month this year.
Exchanges step in to cool the market
To control the risk, some exchanges are stepping in. CME Group said margins for certain Comex silver futures contracts will be raised from Monday. When margins are increased, traders must invest more cash to keep their positions open. Those who cannot afford it are forced to reduce or exit their trades. Analysts say this move could slow down speculation.
Silver prices will keep rising: Speculation
Another sign of the frenzy is the surge in bets that silver prices will keep rising. Many traders have been buying call options, which are a popular way to bet on higher prices. For the biggest silver ETF, iShares Silver Trust, this kind of betting is now at its highest level since 2021.
While London vaults have seen some inflows since then, much of the world’s available silver is still sitting in New York. Traders are waiting for the result of a US investigation that could lead to tariffs or other trade limits.
Silver market under strain
Strategists cited by Bloomberg say silver’s wild swings suggest deeper problems in the physical market. Brendan Fagan, a macro strategist at Markets Live, said silver’s sharp rise and sudden fall show just how strained supply has become. He added that China is now a major pressure point as the new year approaches. For now, silver remains caught between strong demand, limited supply, and a market that may have moved too fast.
