During the morning trading session, spot silver briefly plunged to $76.89 per ounce, marking a drop of over 10%. However, market sentiment quickly reversed, and silver prices rebounded sharply, turning positive. As of press time, spot silver was trading at $79.16 per ounce.
Gold was not spared either. The London spot gold price plummeted more than 3% after the opening, at one point falling below the critical $4,500 support level, before rebounding slightly above $4,600.
01 Market Overview
Today (February 2, 2026), the volatility in the silver market left global investors holding their breath. Spot silver tumbled sharply after the opening, with losses exceeding 10% and hitting an intraday low of $76.89 per ounce.
After a brief plunge, silver demonstrated remarkable resilience. Cautious buying by traders fueled a swift recovery, and prices even turned positive during the day. According to the latest data from Gate, spot silver was quoted at $79.16 per ounce.
Gold also experienced intense swings, with prices briefly falling below the key $4,500 per ounce support level in early trading. The domestic futures market reacted even more dramatically: the main contract for SHFE silver futures hit the daily limit down, while SHFE gold futures plunged over 10%.
02 Analyzing the Causes of Volatility
Multiple factors combined to drive this dramatic price swing. The immediate trigger was the potential change in Federal Reserve leadership.
On Friday, news broke that U.S. President Trump plans to nominate Kevin Warsh as the next Federal Reserve Chair. This announcement swiftly altered market expectations. Before the news, Warsh’s probability of becoming Fed Chair stood at just 31.5%, but it quickly surged to 95.5% and eventually topped 99%.
Kevin Warsh is considered a more hawkish candidate compared to others. He served as a Fed governor during the 2008 financial crisis and has since been a vocal critic of post-crisis monetary policy. Markets anticipate that his nomination could usher in tighter monetary policy, boosting the dollar and putting pressure on dollar-denominated precious metals.
Rising margin requirements also added to market stress. To manage risk, CME Group announced it would raise margin ratios for gold and silver futures from 6% and 11% to 8% and 15%, respectively. This marks the fifth margin hike in just nine days.
These moves directly increase the cost of holding positions, forcing some leveraged traders to reduce their exposure or post additional margin.
03 Technical Factors and Market Structure
Beyond fundamentals, several technical factors intensified the market’s wild swings. Prior to the crash, the precious metals market was already in an extremely overbought state.
Gold’s Relative Strength Index (RSI) reached 90, the highest level seen in decades. Typically, an RSI above 70 signals overbought conditions, and silver was facing a similar situation.
A "gamma squeeze" in market structure also accelerated the price drop. When prices fall below key strike prices, options dealers are forced to sell futures contracts to hedge their risk, creating a self-reinforcing downward spiral.
In the COMEX gold futures market, a large concentration of options positions was clustered at critical levels such as $5,300, $5,200, and $5,100 per ounce. When prices breached these thresholds, it triggered a chain reaction.
Unique circumstances in the Chinese market also affected global silver prices. The UBS SDIC Silver Futures Fund at one point traded at a 36% to 64% premium over Shanghai Futures Exchange contracts.
The Shenzhen Stock Exchange imposed a full-day trading halt on the SDIC Silver ETF, preventing Chinese investors from selling their holdings locally. As a result, they turned to global markets such as the SPDR Silver Trust ETF and COMEX futures to offload positions.
04 Industrial Demand and Silver’s Value
Despite severe short-term volatility, silver’s long-term fundamentals remain noteworthy. Unlike gold, which is primarily a safe-haven asset, silver has significant industrial applications.
Industrial demand now accounts for over 60% of total silver demand, with major uses in photovoltaics, new energy vehicles, and AI servers.
The photovoltaic sector is a key growth driver for silver demand. In 2025, global photovoltaic silver consumption is projected to reach 7,560 tons, accounting for 55% of total silver demand. With the penetration rate of N-type cell technologies (TOPCon/HJT) rising from 9% in 2022 to over 70% by 2025, silver usage per unit is expected to increase by 30% to 100% compared to traditional P-type cells.
Each new energy vehicle uses 35 to 50 grams of silver—two to three times more than conventional gasoline vehicles. The AI server sector is growing even faster, with each server using two to three times as much silver as traditional servers. Demand growth in this segment is expected to reach 55% to 65% in 2025.
These structural changes mean that even if investment demand cools temporarily, industrial applications could continue to provide long-term support for silver prices.
05 Institutional Views and Market Outlook
In the face of such extreme volatility, leading institutional analysts have offered varying interpretations. Mark Wilson, Head of Trading at Goldman Sachs, believes investors should not overreact to this "position shakeout."
He points out that despite the wild swings, the core drivers that have propelled the market since the start of the year remain unchanged. The immediate cause of the correction was excessive crowding in investor positions.
Michael Hartnett, Chief Investment Strategist at Bank of America, stated in his latest report that, for investors, this means that despite sharp short-term volatility, the macro logic driving gold and physical assets higher remains intact.
His analysis suggests that unless a "bigger event" occurs—one more disruptive than the current macro narrative—this bull market, fueled by currency depreciation, is unlikely to end easily. However, he also warns investors to be alert to potential liquidity deleveraging risks in the first half of the year.
UBS previously raised its gold price targets significantly, increasing its forecasts for March, June, and September 2026 to $6,200 per ounce, citing stronger-than-expected demand driven by increased investment.
Xu Ying, Chief Macro Strategist at Orient Securities Derivatives Research Institute, noted that the medium- to long-term bullish thesis for gold remains intact. The latest research from CICC points out that a breakout of London spot gold above $5,500 per ounce marks a key inflection point.
06 How Should Investors Respond?
For individual investors, risk management is especially crucial in such extreme market conditions. Controlling leverage and position size is key to surviving volatile markets.
Given that CME has raised margin requirements five times in nine days, traders should ensure their accounts have sufficient buffer funds to avoid forced liquidation due to margin calls. Especially on trading platforms like Gate, it is vital to monitor margin ratios and account net value in real time.
When trading precious metal-related assets on Gate, it’s advisable to build positions gradually rather than making large, one-off investments. Setting reasonable stop-loss levels can help cap losses on individual trades. Considering current volatility, stop-loss thresholds may need to be widened appropriately.
Periods of market panic often present opportunities. The growth prospects for silver’s industrial applications and the long-term logic for gold as a monetary alternative remain unchanged despite short-term swings.
From an asset allocation perspective, precious metals can serve as a hedge against currency depreciation and economic uncertainty, but allocations should be kept within appropriate limits for a balanced portfolio.
Outlook
Silver prices remain significantly higher than they were 12 months ago, and technical indicators show valuations are still elevated. The Shanghai Gold Exchange responded quickly today, announcing that if a one-sided market develops in deferred silver contracts, margin requirements will be raised from 20% to 26%, and the daily price limit will be adjusted from 19% to 25%.
As the market digests the news of the new Fed Chair nomination, investor attention will shift back to economic fundamentals. Economic data and earnings reports due in mid-February will provide clearer guidance for market direction.
The future trajectory of silver prices will largely depend on the response of the Chinese market. Investors are closely watching how the Shanghai market performs after opening, to see whether Chinese demand for silver can recover following this round of heavy selling.
