Silver Price Crash: XAG/USD Plunges 15% After Highs

Silver Surges to Two-Decade High, Fueled by China Export Curbs and Inflation Fears

Silver experienced its strongest weekly gain as 1998, surging 18% as a confluence of factors-most notably, Beijing’s impending export licensing rules-ignited a buying frenzy. The rally echoes historical market squeezes,prompting some analysts to suggest a potential signal of overlooked inflationary pressures.

Did you know? – The 1979 silver squeeze, led by the Hunt brothers, briefly drove silver prices to nearly $50 an ounce, demonstrating the potential for market manipulation and supply shocks.

The dramatic price increase, which saw the price of an ounce of silver surpass that of a barrel of oil, has been largely attributed to China’s declaration of mandatory export licensing for the metal, effective in 2026. This move,reminiscent of the 1979 silver squeeze orchestrated by the Hunt brothers,has sparked concerns about future supply constraints.

daily trading volume in silver reached USD 9.6 billion, a level not seen since the market peaks of 2011 and 2021, indicating a important surge in investor interest. According to one analyst, the rally could be a harbinger of “hidden hyperinflation,” a phenomenon largely dismissed by mainstream financial commentators.

The shift in market sentiment has been remarkable.Since October 2022, silver has appreciated by 300%, even outpacing the performance of high-growth artificial intelligence stocks-a potential indicator of speculative excess. However, the precious metals complex experienced a sharp sell-off later in the session, with silver hitting a new daily low despite maintaining gains during Asian trading hours. This correction appeared to be driven by forced short covering, a common occurrence near market tops.

Pro tip – Silver is both a monetary metal and an industrial metal, meaning its price is influenced by investment demand and its use in manufacturing, like solar panels and electronics.

Underlying this volatility is a critical shortage of silver inventories, which poses a potential threat to manufacturing industries reliant on the metal.

Technical Analysis Points to Near-Term Downside

Technical analysis suggests a potential pullback in the near term. Examining the four-hour (H4) chart, analysts at RoboForex note that XAG/USD completed an upward wave to 83.70 USD and is now developing a corrective decline toward 66.80 USD. A subsequent upward wave toward 75.30 USD may materialize upon reaching this level. The Moving Average Convergence Divergence (MACD) indicator supports this bearish outlook, with its signal line diverging from the histogram.

On the one-hour (H1) chart, silver completed a downward impulse to 74.85 USD, followed by a correction to 80.60 USD. The market is currently forming another bearish impulse targeting 69.90 USD, with a corrective bounce toward 75.30 USD expected afterward, potentially setting the stage for another leg lower toward 66.80 USD. The Stochastic oscillator reinforces this outlook, with its signal line above 80 but trending downward.

Volatility Expected to Persist

Silver’s recent parabolic rise and subsequent correction underscore the extreme volatility and speculative positioning currently dominating the market. while long-term fundamentals-including structural supply deficits and robust industrial demand-remain supportive, the near-term technical picture suggests further downside toward the 66.80-69.90 USD range.

reader question – Do you think China’s export controls are primarily about controlling silver supply, or are there geopolitical factors at play? Share your thoughts!

This pullback may provide a more stable foundation for the next sustained rally, but traders should closely monitor inventory data and evolving Chinese policy signals. Expect elevated volatility to persist as the market digests these recent extremes.

By RoboFore