Has silver not finished falling after a 30% drop?

This sudden "high platform plunge" has raised expectations among many investors for a deep rebound, but senior commodity analysts have issued warnings: the correction in silver prices may not have reached its end yet, and there is still room for further decline. Traders need to closely monitor key market signals and respond cautiously.

Looking back at recent market trends, silver was once one of the most dazzling "star assets" in the global capital market. According to Business Insider, in the past year, driven by multiple economic factors and investors' fear of missing out (FOMO), silver prices have skyrocketed, with a cumulative increase of over 200%, reaching a historical high at one point, attracting a large number of speculative funds and retail investors to enter the market, forming a temporary frenzy. However, the peak declined, and this long-standing upward trend abruptly came to an end last Friday, ushering in a cruel reversal.

1、 Trigger: Double negative resonance, market sentiment rapidly plummets

This historic setback is not accidental, but the result of multiple negative factors erupting, among which the strengthening of the US dollar and the appointment of the new chairman of the Federal Reserve became the two core triggers that crushed silver prices. Last Friday, President Trump of the United States officially announced that the new chairman of the Federal Reserve would be Kevin Warsh. As soon as the news came out, the market sentiment instantly reversed.

Huaxu is widely regarded by the market as a hawkish figure, and its policy proposals are believed to be more inclined towards stabilizing the US dollar and reshaping the credibility of the Federal Reserve. This expectation directly drives the rapid strengthening of the US dollar index, while the attractiveness of silver priced in US dollars decreases significantly, becoming an important driving force for price declines. At the same time, the strengthening of the US dollar, combined with the significant increase in silver prices in the early stages and severe overbought technical conditions, led to a large number of speculative funds entering the market in a hurry to take profits. Leveraged funds triggered a programmed stop loss, triggering a chain of selling and further amplifying the decline, ultimately causing silver to plummet by more than 30% in a single day, with the largest intraday drop even approaching 36%, and the lowest drop reaching $74.28 per ounce.

In addition, the Chicago Mercantile Exchange (CME) announced in advance on the same day that it would increase the margin ratio for silver trading from 11% to 15%. This risk control measure forced many investors to urgently close their positions before the market closed, further exacerbating the downward trend of prices and becoming a "booster" for the sharp decline.

2、 Warning: The pullback is not yet over, caution is needed for the rebound

Faced with the sharp drop in silver prices, market divergence is evident: some investors believe that a 30% drop in a single day has excessively released risks, and a deep decline and rebound market is expected to come soon; But more senior commodity analysts have given a cautious and pessimistic judgment, clearly stating that this correction may not have reached its end yet.

Morgan Stanley and other institutional analysts have stated that unlike gold, silver lacks a central bank as a structural bargain buyer, and its price increase relies more on speculative funds. The core driving factors that drive silver's rise are more difficult to define and quantify, so the subsequent correction may be deeper than gold. Previously, silver had risen by more than 200% accumulatively, and the foam component was significant. The slump was just the beginning of the squeeze of the foam. With the continued departure of speculative funds, the price still has room for further decline.

Senior commodity analysts added that the current crowded trading pattern in the silver market has not fully eased, and the leveraged funds that entered earlier are still being liquidated, making it difficult to completely release the short-term selling pressure. At the same time, market expectations for the Federal Reserve's policy shift are still fermenting. If Hua Xu successfully takes office and introduces a hawkish policy, the US dollar is expected to further strengthen, which will continue to suppress silver prices and further delay the rebound process.