Silver Crashes as Trump Taps Hawk Warsh

Summary:

Spot silver (XAG/USD) crashed over 12% on Friday in a violent correction, erasing a large portion of its recent record-setting rally

Sell XAGUSD

End Time

CLOSED

97.500

ENTRY

87.000

TGT

106.000

86.713 +7.518 +9.49%

5895

Points

Profit

87.000

TGT

91.605

CLOSING

97.500

ENTRY

106.000

In a breathtaking reversal of fortune that underscores the extreme fragility of speculative market rallies, the silver market endured a violent and historic sell-off on Friday, surrendering a massive portion of its recent record-breaking gains. The precipitous drop, one of the most severe single-day corrections in modern memory, has sent shockwaves through the broader commodities complex and served as a stark reminder of the perils of frothy, leverage-fueled momentum.

After a parabolic ascent that captivated and concerned investors in equal measure, spot silver (XAG/USD) finally buckled under its own weight and a shifting macroeconomic tide. At last check, the white metal was trading near $102.20 per ounce, a staggering decline of 12.30% for the session. This gut-wrenching move effectively erased a significant chunk of the gains that propelled silver to an unprecedented all-time high of $121.66 just yesterday—a peak that now stands as a sobering monument to the frenzy that preceded the collapse.

The selling pressure, which began in Asian hours, metastasized into a full-blown liquidation event during the European trading session. Prices entered a near-freefall, momentarily breaching the critical psychological fortress of $100 to tag an intraday low of $95.08. The scale and velocity of the decline were not merely a function of disappointed bulls; they pointed directly to the forced unwinding of highly leveraged speculative positions. As stop-loss orders were triggered en masse, the selling fed upon itself, creating a vacuum of bids and exacerbating the downward spiral.

This was not an isolated tremor but part of a broader seismic shift rattling the precious metals space. The dramatic pullback reflects a rapid and harsh reassessment of the most speculative safe-haven assets. The market narrative, which for weeks had been dominated by geopolitical fear and endless liquidity, abruptly changed key.

The primary accelerant for today’s fire sale was a fundamental shift in the most important variable for non-yielding assets: the future path of U.S. monetary policy. The catalyst emerged from the political sphere, with the announcement that President Donald Trump intends to nominate Kevin Warsh to lead the Federal Reserve.

The market’s reaction was immediate and unequivocal. Warsh, a former Fed governor, is perceived by investors as notably more hawkish on inflation and a staunch advocate for a more aggressive reduction of the central bank’s bloated balance sheet. His potential leadership implies a Federal Reserve that would be significantly less accommodative, and potentially more proactive in tightening financial conditions, than previously priced in.

The consequences were instantaneous. The U.S. Dollar Index (DXY) surged, climbing off its recent lows as the prospect of higher relative yields boosted its appeal. Concurrently, U.S. Treasury yields jumped across the curve. For silver, which offers no interest or dividend, this twin development is poison. A stronger dollar makes dollar-denominated metals more expensive for foreign buyers, while higher yields increase the opportunity cost of holding a asset that generates no income. The calculus for institutional holders changed in a matter of minutes.

Beyond the Warsh shock, today’s action embodies the classic market dynamic of "buy the rumor, sell the news" amplified to an extreme degree. The recent vertical rally, driven by a potent cocktail of Middle East tensions, global growth anxieties, and massive speculative inflows, had pushed silver into technically overbought territory of historic proportions. The market was a coiled spring, waiting for a catalyst to snap back.

The Fed nomination provided that trigger, prompting a long-overdue wave of profit-taking. Investors who rode the spectacular surge from lower levels seized the opportunity to convert paper gains into realized profits at still-elevated prices. This organic selling merged with the forced liquidation from leveraged players, creating a perfect storm of downward pressure.

Despite the brutal visual on today’s chart, it is crucial to maintain perspective. Even after this dramatic correction, silver remains on track to close one of its strongest monthly performances in history. The underlying fundamental drivers that fueled the rally have not vanished. Geopolitical risk, particularly in the Middle East, remains elevated. Questions surrounding global economic stamina and the ultimate trajectory of inflation are unresolved. The structural demand for tangible assets as a hedge against monetary debasement and uncertainty persists.

What today represents is not necessarily the end of the bullish narrative, but a severe and necessary market cleanse. It has shaken out the weakest hands, reset overextended technical indicators, and forced a repricing based on a new, more hawkish Fed risk. The volatility is a tax on uncertainty, and today, that tax was levied in full.

Going forward, investors must prepare for a new regime of elevated volatility. The market must now grapple with the implications of a potentially transformative shift at the helm of the world’s most influential central bank. Support levels around $100 and below will be tested rigorously. Whether this episode morphs into a deeper correction or proves to be a healthy consolidation within a longer-term uptrend will depend on the evolution of the Fed narrative, the persistence of geopolitical strife, and the appetite of physical buyers to step in at these lower levels.

Technical Analysis

From a technical perspective, silver has shifted from a steady bullish advance into a vulnerable corrective phase on the 4-hour chart. Price had been trending higher along a well-respected ascending trendline, consistently forming higher highs and higher lows. However, the latest sharp rejection from the upper resistance zone near $118.00–$120.00 has disrupted that structure, with price now breaking back below a key horizontal support band around $104.00–$106.00.

This former support zone, which previously acted as a platform for multiple rebounds, is now at risk of turning into resistance. The strong bearish impulse candle slicing through this region signals a change in short-term momentum and suggests that buyers are losing control after an extended run. Price is currently hovering near the psychological $100.00 level, which is providing temporary support, but the broader structure now looks increasingly fragile.

The ascending trendline that guided the rally from early January has also been breached on an intraday basis. Unless silver can quickly reclaim levels above $105.00 and re-establish itself back above the broken support zone, the path of least resistance appears tilted to the downside. A sustained move below $99.00–$100.00 would confirm a deeper corrective phase, exposing the $95.00 region initially, followed by the $90.00–$92.00 zone where prior consolidation and demand were seen.

On the upside, any recovery attempts are likely to face first resistance near $104.00–$106.00. A decisive break back above this area would be needed to stabilize the structure and shift focus toward $110.00. Only a sustained move beyond $116.00–$118.00 would fully revive the broader bullish trend and open the door for a retest of recent highs.

Momentum dynamics now favor consolidation-to-bearish continuation rather than immediate trend resumption. The recent rejection from the highs and the impulsive nature of the selloff suggest fading bullish momentum and rising distribution at elevated levels. This points to increased risk of further downside probing before a more durable base can form.

TRADE RECOMMENDATION

SELL SILVER

ENTRY PRICE: 97.50

STOP LOSS: 106.00

TAKE PROFIT: 87.00

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Warren Takunda

Analysts

Warren Takunda, a seasoned finance leader specializing in the Middle East, is a trusted senior analyst with a proven track record. As head of the finance team, he excels in financial planning, analysis, and reporting. Warren's expertise in financial modeling and investment analysis delivers valuable insights to clients.

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P/L Ratio

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