Forced selling or market correction? Silver hits record high before plunging 8.7%, marking the largest single-day USD decline since 1980.

After hitting a historical high, the price of silver plummeted significantly on Monday, causing concern in the market about whether this astonishing rise in prices this year lacks momentum. According to Dow Jones market data, the most active silver futures contract closed at $70.46 per ounce on Monday, with a one-day drop of 8.7%, marking the largest single-day drop in US dollars since January 22, 1980. At the same time, the price of gold fell by over 4%, to $4330. Just the day before, silver had just set a new record high in closing prices and recorded the largest single-day increase in US dollars in history. Jim Wyckoff, senior market analyst at Kitco, said, "The bulls were clearly spooked by today's market." He pointed out that although the silver market has always been volatile, veteran metal traders may not panic, but retail and speculative funds that entered the market recently may become more cautious before the New Year holiday. "The bulls who entered the market in the past week or two are already in floating losses and can only choose to stop loss and exit." In a mature bull market, such dramatic price swings often indicate a weakening bullish momentum. Demand for precious metals has been strong so far this year, especially with global central banks continuing to buy gold, driving gold prices to perform strongly. Since the beginning of the year, gold futures have risen by about 65%, while silver prices have doubled. Brien Lundin, editor of a precious metals finance magazine, pointed out that in recent months, silver has evolved more into a "speculative trade dominated by Western investors." "Many investors believe that gold has risen too much, so they turn to silver to participate in the market, and once speculation increases, prices will naturally see more intense fluctuations." Market participants generally believe that this sharp decline is closely related to the exchange's increase in margin requirements. One of the world's largest commodity trading platforms, the Chicago Mercantile Exchange (CME), announced last Friday that it raised margin standards for precious metals such as gold and silver, requiring traders to put in more funds to prevent default risks in extreme volatility. Lundin stated that the increase in margin would directly suppress speculative trading, while also raising hedging costs for industrial clients. In addition, thin trading before the holidays exacerbated price volatility, and many investors tried to avoid the common profit-taking and commodity fund rebalancing pressures at the beginning of the new year, all of which together intensified selling. Although the short-term correction was severe, some analysts believe this does not necessarily mean a trend reversal. Rania Gule, senior market analyst at XS.com, pointed out that this decline is more like a "healthy correction" after a rapid and unprecedented rise, rather than a fundamental denial of the long-term bullish logic. She believes that only when supply constraints in China significantly ease or when economic and geopolitical uncertainty driving the rise in precious metals significantly decreases, will silver be likely to see a sustained reversal. Fundamentally, silver is not only an investment product but also an important industrial metal. In the background of strong demand in new energy, artificial intelligence, and other fields, the US Department of the Interior has included silver in its list of critical minerals. However, Lundin also warned that the recent extreme fluctuations in silver are more likely due to the interweaving of short positions and profit-taking in the futures and options markets. "It is difficult to attribute it to a single factor, but after a significant increase, there is indeed greater downward pressure in the short term." It is worth noting that the overall sentiment in risk assets is also cooling off. Major US stock indexes all fell on Monday, with the Nasdaq falling by 0.5% and Bitcoin dropping by over 0.7%.