(Bloomberg) — Silver retreated sharply after smashing through $80 an ounce for the first time, halting a record-breaking rally powered by Chinese speculative demand. Gold also tumbled the most in two months.
The white metal fell by more than 9% in its biggest intraday decline since 2021 on Monday as technical indicators showed the rally may have run too fast, too soon. GOld fell as much as 4.5% to below $4,329 an ounce, pulling back from the fresh record high set last week, on signs the metal was also overbought.
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Silver’s sharp reversal came hours after soaring above $84 an ounce after surging Chinese investment demand pulled the metal higher. Premiums for spot silver in Shanghai rose above $8 an ounce over London prices, the biggest spread on record.
Silver’s 14-day relative strength index — a gauge of buying and selling momentum — showed a reading of about 67 after staying above 70 for the past three weeks. A reading above 70 is considered overbought.
UBS SDIC Fund Management Co. had become increasingly concerned that investors could be exposed to heavy losses should silver’s bull market suddenly turn. The fund’s premium ballooned last week to more than 60% over the value of its underlying assets — silver contracts on the Shanghai Futures Exchange.
Indeed, unlike gold, silver is a valuable component in a range of products, particularly in solar cells. With inventories near their lowest on record, there’s a risk of supply shortages that could affect multiple industries.
Some exchanges are moving to rein in risk. The margins for some Comex silver futures contracts will be raised from Monday, according to a statement from CME Group Inc. — a move that Wang said would help reduce speculation.
Last week’s rally came just two months after the London silver market suffered a full-blown squeeze as flows into exchange traded funds and exports to India eroded inventories that were already critically low. London’s vaults have seen significant inflows since then, but much of the world’s available silver remains in New York as traders wait for the outcome of a US probe that could lead to tariffs or other trade restrictions.
Spot silver fell 9.2% to $71.96 an ounce as of 10:17 a.m. in New York, after hitting a record $84.01 earlier in the session. Gold fell 4.4% to $4,334.14 an ounce. Platinum plunged more than 13% while palladium sank more than 15% in its biggest decline since 2022.
–With assistance from Winnie Zhu and Preeti Soni.
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