1) Progress in peace talks kills demand for safe havens
The immediate cause of today’s crash came from apparently productive discussions between US President Donald Trump and Ukrainian President Volodymyr Zelensky about a possible peace deal. Trump said on Sunday that he and Zelenskiy were getting “a lot closer, maybe very close” to an agreement to end the war in Ukraine. Easing geopolitical tensions reduced demand for safe havens across the precious metals complex, leading to sharp profit bookings.Also read | Silver price falls Rs 21,000 in an hour as overheated rally cools down after crossing Rs 2.5 lakh/kg
2) 200-DMA warning
BTIG analyst Jonathan Krinsky issued a stark warning: “Precious metals have gone parabolic. There’s no other way to put it. Parabolas only end one way, with an equal and opposite downside reaction. They don’t correct over time.”
The technical image flashes red. Silver prices were trading 89% above their 200-day moving average (DMA), a level that historically precedes significant declines. “Beyond the pressure from the ‘Hunt Brothers’ in 1979, even silver was 60% above its 200 DMA; twenty, thirty and forty days later it was significantly lower,” Krinsky noted, adding that the 174% gain since the start of the year “has probably priced in much of that good news.” Manish Banthia, CIO Fixed Income at ICICI Prudential Mutual Fund, warned that “history suggests that such spectacular gains in silver rarely end softly.””In 1979-80, silver rose from $6 to $49 an ounce before collapsing by more than 90%. In 2011, prices peaked around $48 and then fell by more than 75% in subsequent years. In both cases, silver had already multiplied several times before the decline began. Since the depths of the pandemic, prices have increased more than sixfold. They have almost tripled in the past year alone,” he said.
Past cycles show that once momentum breaks, silver can fall sharply – often by 50% or more.
3) Friday’s 10% Surge: A classic blow-off top
Silver’s more than 10% rise on Friday – one of the largest single-day gains ever – could have been the highlight. Krinsky recalled that “the last time it rose 10% during a multi-month record was in 1987. It marked the peak and fell 25% over the next few weeks.”
On Friday, the SLV silver ETF also saw trading notional dollar volume of $9.6 billion – the second highest in its history after May 2011, just after the last peak. “That’s evidence of an eruption,” Krinsky said.
4) Record the weekly reinforcement signals of exhaustion
Last week’s 18% gain marked the biggest weekly advance in more than 45 years. The previous four weeks saw gains of 12.95%, 3.26%, 6.42% and 8.39%, with only three weeks of decline since mid-August. Technical indicators scream overheated: the monthly RSI reached 91, but was only surpassed during the last peak of the Hunt Brothers squeeze.
5) CME margin increase increases selling pressure
The Chicago Mercantile Exchange increased the initial margin requirement for the March 2026 silver futures contract to approximately $25,000 effective today, up from $20,000 earlier this month. This measure forces traders to post more collateral, leading to further liquidations.
6) Dollar Strength and Risk Rotation
Justin Khoo, Senior Market Analyst – APAC at VT Markets, explained that “this selling pressure was exacerbated by a slight rise in the US dollar and interest rates, which reduced the appeal of non-yielding commodities.”
In addition, improved risk appetite in broader markets saw funds return to equities, with traders squaring their positions before the end of the year.
What’s next?
Despite the carnage, Jigar Trivedi, Senior Research Analyst at Reliance Securities, claims that “the trend is broadly positive but volatile” with Rs 2.4 lakh supporting silver in the near term.
However, BTIG’s Krinsky suspects that “a pullback to the 50 DMA (55.40) is very likely in the next 1-2 months. That would mean a -25-30% pullback depending on timing.”
For now, silver’s extraordinary rally, fueled by its designation as a critical U.S. mineral, supply constraints and low inventories amid rising industrial and investment demand, has hit the pause button. Whether this is a healthy correction or the start of a 50%-plus collapse that history suggests remains to be seen.
(Disclaimer: The recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times.)
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