Silver "Flash Crash" Then Rebound
Silver prices (XAG/USD) experienced another roller coaster ride on Friday (February 6th). After plummeting nearly 10% early in the session and briefly touching the $64 area, silver reversed course and rallied sharply. This phenomenon underscores the fact that silver is currently in its wildest market phase—its fluctuations are far more extreme than those of gold.
Entering the European session, silver was trading back above $73 per ounce, with the latest price in the $73.7–$73.9 range. This movement saw silver record a daily gain of more than 3% from its low, albeit a very bumpy ride.
Why is silver more brutal than gold? Because the silver market is smaller, liquidity is thinner, and speculative positions are typically more substantial. Once sentiment changes, silver is susceptible to consecutive stop-losses and forced liquidation, followed by a rebound when short-covering and discount buyers step in.
Despite today's strong rebound, silver's overall position hasn't recovered: it's still on track for its second consecutive weekly decline and remains around 40%+ below its January 29th peak. This means today's bounce is more like a breather in the middle of a storm, rather than a sign of a return to the uptrend.
One trigger for the increased volatility was the CME's decision to again increase margins/performance bonds for gold and silver futures contracts. When margins increase, the cost of holding leveraged positions also increases—many traders are forced to reduce their positions, and at certain times, this can trigger forced selling that deepens the decline before a rebound.
At the same time, pressure on precious metals also intensified when the US dollar rebounded following news regarding the Fed's leadership (the market believes a more hawkish figure could strengthen the USD, making dollar-denominated commodities feel "more expensive"). The combination of a volatile dollar and heavy speculative positioning made silver the hottest battleground this week.
Source: Newsmaker.id
