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Silver prices experienced their most violent decline in decades on Friday, plummeting 35% globally from record highs as Kevin Warsh’s nomination as Federal Reserve Chair triggered a massive selloff in precious metals. The white metal crashed from $121 per ounce to $75, while gold fell 12% to $4,718 per ounce, wiping out billions in market value and forcing leveraged traders into panic selling.
Warsh Nomination Sparks Dollar Surge
The selloff began after President Trump nominated Kevin Warsh, a former Fed governor known for his hawkish stance on inflation and strong dollar advocacy, to replace Jerome Powell. According to Sandip Raichura, CEO of Retail Broking at PL Capital, “Warsh’s nomination triggered profit booking in Asia, which then spread to the rest of the world.” The dollar index jumped 0.9% to 97.15, pressuring precious metals as safe-haven demand evaporated. Ponmudi R, CEO at Enrich Money, explained that Warsh’s reputation for Fed independence and inflation control prompted “rapid macro re-pricing” with rising real yields and swift unwinding of overextended positions.
Indian Markets Feel the Heat
Domestic markets mirrored the global carnage, with silver tumbling 19% to ₹3.12 lakh per kilogram in Delhi, according to the All India Sarafa Association. Gold dropped 2% to ₹1.65 lakh per 10 grams despite posting strong monthly gains. The white metal had touched a record ₹4.04 lakh per kg on Thursday before the brutal correction. Despite the two-day rout, silver still closed January with impressive 30.5% gains, while gold surged 20.2% for the month. The Indian jewelry business faces a “double hit” from soaring prices and sluggish demand, with industry hoping for import duty cuts in the upcoming Union Budget.
Hunt Brothers Flashback and Margin Mayhem
The silver crash drew comparisons to the infamous Hunt Brothers collapse of 1980, when the Texas oil heirs’ attempt to corner the silver market ended in spectacular failure. CoinDesk noted that “only those precious metals traders who were around during the days of the Hunt Brothers in 1980 will be familiar with that sort of downside volatility.” Adding fuel to the fire, CME Group raised margin requirements for gold from 6% to 8% and silver from 11% to 15%, effective Monday. SEBI-registered commodity expert Anuj Gupta warned these margin hikes “are expected to keep the precious metals under pressure,” as higher collateral demands intensify selling pressure on leveraged positions.
Buffett’s Contrarian View Vindicated
Warren Buffett’s long-standing skepticism toward gold appears prescient as the metal retreats from record highs. The Berkshire Hathaway veteran famously argued he would choose farmland and “seven Exxon Mobils” over a $7 trillion cube of gold. “Gold is a way of going long on fear,” Buffett stated, adding that “the gold itself doesn’t produce anything.” His view that investors “make money when people are afraid and lose money when people are less afraid” resonates as panic selling grips precious metals markets.
Digital Gold Narrative Crumbles
The crash exposed cracks in cryptocurrency’s “digital gold” narrative as traders pivoted back to physical metals. Bitcoin held relatively steady around $83,000 while precious metals imploded, challenging the idea that crypto serves as a digital alternative to gold. Paul Howard from trading firm Wincent noted that “cryptocurrency markets have been the victim of risk capital flowing into the still popular commodities trade,” but suggested this dynamic may now be shifting. Experts predict at least 30% more downside in silver, with Amit Goel of Pace 360 warning the white metal “is sitting on a bubble” despite structural demand remaining intact.
Sources: Thehindubusinessline, Livemint, Economictimes, Coindesk
