As haven demand cools and supply pressures ease, silver retreats sharply from record highs, triggering a broader pullback in precious metals.
A Sudden Reversal After Record Highs
After hitting a fresh all-time high near $54.50/oz, silver prices tumbled more than 6%, marking the biggest single-day drop in six months. The sharp pullback follows a week-long surge driven by safe-haven demand and supply imbalances.
- Spot silver dropped to $51.88/oz in New York.
- The Relative Strength Index (RSI) indicated an overbought market, suggesting an unsustainable pace of gains.
- Other precious metals followed suit, with gold down 1.9%, and platinum and palladium also retreating.
Easing Geopolitical Anxiety Cools Haven Demand
The rally in silver was partially reversed as investor anxiety over global risks subsided:
- President Donald Trump’s remarks eased US-China trade tensions.
- Positive earnings from US regional banks improved credit sentiment, lifting bond yields.
- Rising rates make non-yielding assets like silver less attractive, triggering some liquidation.
London’s Historic Squeeze Begins to Ease
Much of silver’s rally was fueled by a severe supply squeeze in London, creating a sharp price gap with US markets. That squeeze is now easing, leading to profit-taking:
- Silver borrowing costs in London spiked to an annualized 20%.
- Over 15 million ounces were pulled from Comex warehouses in New York.
- Another 10 million ounces flowed out of silver ETFs on Thursday.
- This metal is heading toward London to ease the supply shortage.
The price premium between London and New York narrowed to around $1.10, down from a $3 spread last week.
Momentum Signals a Needed Cool-Off
Technical indicators signaled that the silver rally was overstretched:
- The RSI has shown persistent overbought conditions since late September.
- Traders took advantage of the momentum-driven surge to book profits, triggering a chain reaction.
- The pattern mirrors similar trends in gold, which, despite its recent dip, remains up over 60% year-to-date, driven by central bank demand and ETF inflows.
Rate Expectations and Market Positioning
Markets are still pricing in a large US rate cut by year-end, which would be bullish for gold and silver. But in the short term:
- Rising yields are pressuring prices.
- Investors are rotating into risk assets amid easing geopolitical concerns.
- The pullback may offer an entry point, but volatility is likely to remain high.
Silver plunged over 6% after touching record highs, as easing geopolitical tensions and improved US credit sentiment reduced haven demand. The cooling of London’s supply squeeze and overbought technicals further triggered profit-taking across precious metals.