Silver is recovering from its sharpest intraday reversal since the 2008 financial crisis, rising again above $110 after dropping more than 7% from Monday's record high of over $117.

The extreme volatility of precious metals reflects a broader crisis of confidence in fiat currencies and government bonds. With gold rising above $5,000 and silver experiencing its most dramatic swings in 17 years, there is deep concern in the markets about the sustainability of major economies' fiscal policies – a sentiment that could also reflect on riskier assets, including cryptocurrencies.

Record rise faces steep turn

Silver recorded its largest intraday gain since the global financial crisis, with prices rising 14% before most of the gain melted away in late U.S. trading. After finding support at around $103, silver has risen again above $110, narrowing losses to under 5% as Asian buyers activated.

Gold retreated after touching the level of $5,111.07 and settled around $5,100.

The depreciation trade fuels the price rally

The rise of precious metals reflects a growing investor flight from currencies and government bonds due to increasing fiscal policy concerns. The massive sell-off seen in Japan's bond market last week highlighted distrust against abundant government spending in developed economies.

Max Belmont of First Eagle Investment Management noted that gold historically acts as a gauge of market concerns and provides protection against inflation surprises, unexpected market crashes, and geopolitical crises.

The dollar index has fallen nearly 2% over six trading sessions amid speculation that the United States could help Japan strengthen the yen. This has raised concerns about the independence of the central bank and the unpredictable policies of the Trump administration.

Technical warnings emerge

Despite the historical rise, major precious metals refiner Heraeus Precious Metals has warned that the price rally may already be too far along. The company refers to technical indicators showing an overbought market and a contracted gold-silver ratio now at 50, down from 100 a year ago.

Claudio Wewel from J. Safra Sarasin warned that silver typically experiences larger corrections than gold after prolonged rallies, as silver's volatility is higher. This can weaken the risk-return ratio if sentiment fades.

Key levels to watch

The ability of silver to stay above the $110 level is crucial for the short-term direction. A return to Monday's closing level of $115.50 could create a V-shaped recovery narrative, while a drop below $105 would indicate a deeper correction.

Markets are now awaiting Trump's Fed chair nomination and this week's FOMC decision, with the central bank generally expected to pause on rate cuts.