Silver Falls Over 6% as Precious Metals Cool Off After Record Rally

October 18: Silver prices saw a sharp reversal on Friday, plunging more than 6% in their biggest single-day drop in six months, as the recent precious metals rally showed signs of exhaustion. The correction came after silver briefly surged to record highs near $54.50 an ounce earlier in the week — a move that analysts now believe went “too far, too fast.”

The pullback reflects a cooling in haven demand for gold and silver, driven by easing fears over US credit quality and improved trade sentiment between the United States and China.

Easing Trade Tensions and Stronger US Credit Outlook Pressure Silver

Market sentiment turned positive after President Donald Trump’s comments suggested progress in trade discussions with China, soothing anxiety that had fueled safe-haven buying in recent weeks.

At the same time, strong earnings from regional US banks and improving credit conditions helped stabilize equity markets and lift bond yields. Rising yields typically weigh on non-yielding assets like silver and gold, making them less attractive compared to interest-bearing securities.

“The London shortage is alleviating somewhat from extreme levels and the more regional dislocations smooth out, there could be pressure and profit-taking,” said Nicky Shiels, Head of Metals Strategy at MKS Pamp SA.

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Historic Silver Squeeze in London Shows Signs of Easing

The recent silver rally was driven by an unprecedented supply squeeze in the London market, which saw prices soar well above US futures. The surge forced traders to ship physical silver across the Atlantic, leading to a global hunt for the metal.

However, that squeeze appears to be easing. Over the past week, more than 15 million ounces of silver have been withdrawn from Comex-linked warehouses in New York, much of which is believed to be heading to London to relieve shortages.

Additionally, silver-backed ETFs recorded a 10 million-ounce outflow on Thursday, further contributing to market rebalancing.

The price gap between London and New York silver has narrowed to about $1.10 an ounce, down sharply from the $3 premium seen last week, signaling improved liquidity and less panic buying.

Technical Correction After Overheated Rally

Analysts point to technical indicators suggesting that silver’s rapid ascent since late September was unsustainable. The Relative Strength Index (RSI) — a key momentum gauge — had been flashing overbought signals, indicating that too many investors had piled into the trade.

The result was a textbook correction, with prices pulling back from overextended levels.

At 2:38 p.m. in New York, spot silver was down 4.4% to $51.88 an ounce, after briefly touching record highs near $54.50 earlier in the week.

Spot gold also fell 1.9%, while platinum and palladium declined in tandem, underscoring the broad retreat across the precious metals complex.

Gold Still Up Over 60% in 2025 Despite Short-Term Dip

While silver’s correction has grabbed attention, gold continues to outperform on a yearly basis, having surged more than 60% in 2025. The rally has been supported by record central-bank buying, robust inflows into gold-backed ETFs, and growing expectations of at least one significant US interest rate cut before the year’s end.

Lower rates typically boost demand for non-yielding assets like gold and silver by reducing the opportunity cost of holding them. However, short-term volatility remains high as markets adjust to shifting expectations on inflation and interest rates.

“This correction in silver doesn’t necessarily end the bull run,” said a Mumbai-based commodities analyst. “It’s a natural pause after an overextended move, and fundamentals like central-bank demand and inflation hedging remain strong.”

Silver’s Long-Term Fundamentals Remain Positive

Despite Friday’s steep drop, analysts remain broadly optimistic about silver’s long-term outlook, citing industrial demand from the renewable energy and electric vehicle (EV) sectors, alongside its role as a monetary hedge.

Silver plays a critical role in solar panel production, batteries, and electronics, meaning that clean energy expansion could underpin strong demand even as speculative positions unwind.

However, short-term traders are likely to stay cautious until the London market tightness fully normalizes and volatility subsides.

Consolidation Before the Next Move

Market watchers expect silver to consolidate in the near term between $50 and $52 an ounce, with potential for renewed momentum if rate cut expectations strengthen or if economic uncertainty reemerges.

Gold’s performance will continue to set the tone for the broader precious metals complex, with investors closely watching central bank activity, geopolitical headlines, and US economic data releases in the coming weeks.

Spot Prices (as of 2:38 p.m. New York):

• Silver: $51.88/oz (–4.4%)

• Gold: $2,385/oz (–1.9%)

• Platinum: $940/oz (–3.2%)

• Palladium: $1,024/oz (–2.8%)

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