Silver Price Crash Explained — Three factors that triggered the 37% plunge on Friday

Spot Silver prices plunged 37% on Friday, January 30, marking their biggest single-day fall on record. Futures plummeted 31%, the worst fall seen since March 1980.

From touching record levels of over $120 earlier this week, Silver prices plunged to $84 in a single session last night.

The situation for Silver-linked ETFs in the US was worse. The ProShares Ultra Silver ETF saw prices crash 60% in a single trading session, while the iShares Silver Trust ETF plunged 29%. For both the funds, it was the worst day on record.

Multiple factors contributed to the sell-off seen overnight, none more important than the three highlighted below:

Kevin Warsh

An important part of the rally seen in precious metals over 2025 and through the month of January this year, were concerns surrounding the independence of the US Federal Reserve, especially considering US President Donald Trump's regular demands of lowering interest rates and jibes at outgoing chair Jerome Powell, indicating multiple times that he could fire him.

Until last week, speculations were that White House National Economic Council Director Kevin Hassett would be picked by Trump for the top job and he would be in congruence with the White House's demand for lower rates.

However, Trump picked former Fed Governor Kevin Warsh as the new Fed Chair on Friday

, someone known for advocating central bank independence while determining policy. Warsh is also said to be an "inflation-hawk."

Trump's choice allayed some concerns with regards to the Fed's independence in the short-term, which is indirectly negative for precious metals such as Gold and Silver, as they both pay no interest. Lower rates are positive for them.

US Dollar

A weak US Dollar, coupled with Trump's remarks on wanting a weak currency also contributed to the price moves seen in Gold and Silver this month.

However, the appointment of Warsh as the new Fed Chair triggered a sharp reversal in the Greenback, which saw its biggest single-day gain since May last year.

The US Dollar index is back above the mark of 97, fears of central bank independence eased with Warsh's nomination.

A stronger US Dollar is negative for both Gold and Silver, as these metals are priced in US Dollars globally, making them more expensive for foreign buyers, thereby reducing demand. Higher interest rates tend to reduce the appeal of non-interest yielding assets like Silver.

Technical Triggers

There were multiple technical factors too that contributed to the plunge seen in Silver prices last night.

Firstly, the Relative Strength Index on both Gold and Silver charts was well into "overbought" territory. A reading above 70 means that asset is "overbought". For Silver, the RSI had tested levels of 80-plus during the record rally.

Money managers are looking to take some profits off the table as well. US government data showed on Friday that hedge funds and other large speculators reduced net-long positions on Silver by 36% to 7,294 contracts for the week that ended on January 27. That is the lowest level in 23 months.

Increase in margin requirements for trading, liquidation of speculative positions once prices began to fall, and profit booking by investors may have also accelerated the fall seen last night.

"It’s like one of those excuses markets are waiting for to unwind those parabolic moves," Christopher Wong of Oversea-Chinese Banking Corp. wrote in a note, referring to Warsh's nomination as the new Fed chair.

Commerzbank AG wrote that the extent of the correction suggests that market participants were simply waiting for an opportunity to take profits after the rapid price rase. However, it believes that while Warsh's appointment may have allayed some independence fears, the Fed "will yield to pressure to at least some extent and cut interest rates more than is currently being priced in."

Silver's fall took the precious metal below all important moving averages. "We need to prepare for the roller-coaster to continue though," said Dominik Sperzel, head of trading at Heraeus Precious Metals.

(With Inputs From Agencies)