Silver Plunges Nearly 9%, Having Previously Erased All Gains for the Year. Global Liquidity Run Is Erupting

TradingKey - During Monday's Asian trading session, spot silver experienced a rapid plunge, with intraday losses extending to over 8% at one point. Prices broke below the $62 mark, hitting a new year-to-date low. From a technical perspective, silver saw a clear 'waterfall' decline in a short period, signaling a swift shift in market sentiment.

The lingering uncertainty in the Middle East continues to weigh on global assets. During the Asian session this week, a global liquidity crunch erupted, leading to a sustained sell-off across international equity markets.

Structurally, this plunge was primarily driven by pressure from a strengthening U.S. dollar. As the U.S. Dollar Index continues to climb—amid persistent inflation and delayed expectations for rate cuts—capital is flowing back into dollar-denominated assets, exerting systemic pressure on precious metals priced in dollars.

Furthermore, silver's asset profile differs from that of gold; the silver market is relatively smaller and lacks the stable support of long-term institutional allocations, such as those from central banks. This means that once there is a concentrated withdrawal of capital, price volatility is more easily amplified, potentially leading to 'stampede' market conditions.

At the same time, excessive gains in the preceding period set the stage for this correction. Driven by the confluence of inflation trades and safe-haven sentiment, silver had recorded significant periodic gains, leaving short-term speculative capital with high floating profits. Given the marginal shift in macro expectations, such capital is more inclined to exit quickly to lock in profits, thereby steepening the downward slope of the price.

From a trading perspective, silver possesses dual attributes as both a precious and an industrial metal; its risk profile is often repriced when market sentiment tightens. When the market enters a 'liquidity first' phase, capital tends to favor cash or highly liquid assets, making silver one of the primary targets for position reduction.

Amid high macro uncertainty, silver is likely to maintain high volatility in the short term, with price elasticity significantly higher than that of gold. Investors should pay closer attention to capital flows and shifts in market sentiment.