Historic Silver Drop Sparks Fresh Concerns Over Market Manipulation

TLDR

• Silver fell 34% in 24 hours, marking its biggest single-day drop in history.
• Silver’s market value dropped by $1.8 trillion after falling from $110 to $74.
• COMEX silver trades at $92 while Shanghai prices reached $130, a 40% gap.
• The U.S. silver paper-to-physical ratio is estimated at 350 to 1.

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Silver prices fell sharply, dropping over 34% in one day to $74 before rebounding, sparking renewed concerns over market manipulation. The sharp drop came after a record-breaking rally and erased trillions in market value across gold and silver markets.

Silver Market Faces Sharp Drop After Record Rally

Silver futures plunged over 34% in a single day, dropping to $74 before recovering to around $82. This marked the metal’s steepest single-day decline ever. The fall came shortly after silver hit all-time highs above $120 earlier in the month.

Gold also declined, falling more than 11% to near $4,700 after recently touching record highs above $5,500. The correction followed months of steep gains fueled by inflation hedging and weak dollar sentiment.

The sudden reversal wiped out over $3 trillion in combined market value from both metals in less than 24 hours. Many traders moved to take profits amid increasing macroeconomic uncertainty.

Leadership Change at Federal Reserve Triggers Risk-Off Shift

The selloff coincided with a wider move away from risk assets. On Friday, President Donald Trump announced Kevin Warsh as the next Federal Reserve chair. Warsh is seen as hawkish on monetary policy, which caused markets to brace for tighter conditions.

Following the announcement, the 10-year U.S. Treasury yield rose to around 4.25%. The U.S. Dollar Index climbed 0.7%, reversing earlier weakness. These movements signaled stronger expectations for higher interest rates ahead.

Analysts say this shift in sentiment influenced metals traders, many of whom had built up large positions based on continued easing. As uncertainty grew, leveraged positions were unwound rapidly.

Manipulation Concerns Rise as Price Gaps Widen

The sharp difference in silver prices between global markets has sparked concern over possible manipulation. COMEX silver is trading near $92 in the U.S., while physical silver in Shanghai reached $130 per ounce. This shows a 40% premium in China. 

Analysts note that the U.S. silver market is dominated by paper contracts, which often do not reflect real metal demand. The paper-to-physical silver ratio in the U.S. is estimated to be around 350 to 1. Reports suggest that large institutions may be using paper silver contracts to influence prices downward. 

Despite low paper prices, physical silver in key Asian markets remains in high demand. Shanghai Metal Market (SMM) prices, which are based on actual transactions, have remained elevated. Current data shows physical silver is still priced near all-time highs in China, even after recent global corrections.

Heavy Selling and Crowded Trades Fuel Correction

According to analysts, the precious metals rally attracted momentum-driven trading and heavy leverage. This caused prices to climb beyond traditional value levels. As gold and silver became part of crowded trades, the risk of a fast reversal increased.

Ole S Hansen of Saxo Bank posted on X that silver “can rally but only for so long without eventually killing demand.” He noted that hedge funds cut their net long positions by one-third in the week before the collapse.

Experts say this type of positioning often leads to corrections as traders exit en masse. While some claim manipulation, others view the price movement as a normal response to an overheated market. Even after the rebound, silver’s market cap stands at about $4.2 trillion. This allowed NVIDIA to surpass it in value, becoming the world’s second-largest asset by market capitalization at $4.6 trillion.

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