Gold and silver prices plunged sharply on Monday after touching historic highs, bringing an abrupt halt to one of the strongest precious metals rallies in decades. The selloff was triggered by tighter trading conditions, stretched valuations, and growing concerns that prices had surged too far, too fast.
Gold futures fell nearly 4.5% to around $4,340 per ounce, while silver futures collapsed 8–9%, marking their worst single-day decline since 2021. The move came just hours after silver surged to an all-time high above $84 per ounce before crashing toward the $70 level in thin post-holiday trading.
Margin Hikes and Overheated Trades
Investor nerves were rattled after CME Group raised margin requirements on Comex silver futures, forcing leveraged traders to either inject fresh capital or unwind positions. The margin hike intensified selling pressure in an already volatile market.
Technical indicators had been flashing warning signs. Silver’s relative strength index (RSI) remained above 70 for weeks, a level often associated with overbought conditions. “When it gets this stretched, be careful,” Bloomberg Intelligence commodity strategist Mike McGlone cautioned, noting similarities to the late-1970s rally that ended in a sharp crash.
Industrial Demand and Supply Fears Still Linger
Despite the sharp correction, the broader bull case for silver remains intact. Nearly 60% of global silver demand comes from industrial use, according to the Silver Institute, with applications spanning solar panels, electric vehicles, data centers, and electronics.
China — the world’s third-largest silver producer — is expected to tighten export controls from January, heightening fears of supply shortages just as demand from the AI and clean-energy sectors accelerates. Silver is also in its fifth consecutive year of a structural market deficit and was added to the US critical minerals list earlier this year, raising concerns over future tariffs and trade restrictions.
Speculation, ETFs, and Options Frenzy
Speculative activity has played a major role in silver’s extreme volatility. Chinese investor buying surged in December, pushing Shanghai silver premiums to record highs. One of China’s only pure-play silver funds even stopped accepting new investors after repeated risk warnings failed to cool demand.
Globally, silver ETF holdings have risen by more than 150 million ounces in 2025, steadily draining available supply. Meanwhile, call option activity on silver futures and ETFs has surged to levels last seen during the 2021 retail trading boom, underscoring speculative excess.
Gold-Silver Ratio Shifts
Precious metals overall have had a standout year. Gold is up roughly 67% year-to-date, supported by central bank buying and a weaker US dollar. Silver has outperformed dramatically, gaining nearly 140–150%, reflecting its smaller market size and industrial leverage.
Market participants closely tracking the gold-to-silver ratio note that the recent correction followed a rapid compression of the ratio, after it had stretched beyond 100 earlier this year — a signal many traders interpreted as a cue to rotate into silver.
What Comes Next?
While prices may remain volatile in the near term due to margin pressures and profit-taking, analysts say underlying supply constraints and industrial demand could keep precious metals structurally supported over the longer run.
For now, however, the message from markets is clear: after a parabolic rise, even the strongest rallies can pause — or reverse — abruptly.
