Silver recovers after its sharpest intraday turnaround since the financial crisis of 2008. The price rises again above $110 after falling more than 7% from Monday's record above $117.
The extreme volatility in precious metals reflects a broader crisis of confidence in fiat currencies and government debt. Now that gold breaks through $5,000 and silver shows the wildest fluctuations in 17 years, the markets indicate that there is significant unrest regarding the sustainability of government finances in major economies. This sentiment may spread to riskier assets such as cryptocurrencies.
Record rise followed by sharp turnaround
The white metal saw the largest intraday rise since the global financial crisis. The price rose by 14% before a large part of that was given back during late US trading. After a support point at around $103, silver has climbed back above $110. The losses have been reduced to below 5% as buyers entered during the Asian session.
Gold also fell again after touching $5,111.07 and closed around $5,100.
Devaluation trade drives rally
The resurgence of precious metals shows that more and more investors are moving away from currencies and government bonds due to concerns about government spending. A major sell-off in the Japanese bond market last week makes it clear that distrust over government spending in wealthy countries is growing.
Max Belmont of First Eagle Investment Management said that gold is traditionally a barometer for market unrest. It provides protection against unexpected inflation, sudden market declines, and geopolitical tensions.
The dollar index has fallen nearly 2% in six sessions. This is due to speculation that the US may help Japan strengthen the yen. This raises concerns about the independence of the Federal Reserve and the unpredictability of the Trump administration's policies.
Technical warnings noted
Despite the large price increase, Heraeus Precious Metals, a major processor, warned that the rally could have gone too far. There are technical signals of overbought conditions, and the gold-silver ratio is now 50, while it was 100 last year.
Claudio Wewel of J. Safra Sarasin warned that silver usually shows larger declines than gold after such a long rise. This is because silver is much more volatile, which can worsen the risk-reward balance as momentum decreases.
Important levels to watch
Whether silver can stay above $110 is important for the short-term direction. A recovery towards Monday's close at $115.50 could create a V-shaped recovery story. However, if the price drops below $105, it could indicate a stronger correction coming.
Markets are now looking forward to Trump's nomination for a new Fed chair and the upcoming FOMC decision this week. It is assumed that the central bank will pause interest rate cuts for now.
