This explains silver's tumble as gold finds a footing in precious-metals rout

By Myra P. Saefong

Silver futures drop by more than 9% on Thursday

Silver's price moves have far outpaced gold's in recent days.

Silver's decline far outpaced that of gold on Thursday, with its sharp price losses leading to a turn lower for the week, even as gold looked to recover much of what it had lost during the recent downturn for precious metals.

High volatility levels and changes to market positioning following a drop that pulled silver prices down by more than 30% in just two sessions helped explain why silver's more than 9% drop in price Thursday far outpaced gold's more modest 1.2% decline.

The outsize move in silver is 'much more about positioning and volatility than some sudden change in the physical metal markets.' Adam Koos, Libertas Wealth Management

The outsize move in silver is "much more about positioning and volatility than some sudden change in the physical metal markets," said Adam Koos, president and senior financial adviser at Libertas Wealth Management Group.

On Thursday, silver for March delivery (SIH26) (SI00) settled at $76.71 an ounce on Comex, down $7.68, or 9.1% for the session, while April gold (GCJ26) (GC00) lost 1.2%, or $61.30, to finish at $4,889.50 an ounce. Week to date, silver is down 2.3%, even as gold has gained about 3%.

Volatility in silver was nearly three times higher than in gold, said Michael Armbruster, co-founder and managing partner at futures brokerage Altavest.

Silver's volatility, as represented by the Cboe Silver ETF Volatility Index, stood at around 95 on Thursday, while gold's volatility based on the Cboe Gold ETF Volatility Index was at around 36.

Yet volatility isn't unique to this year, said Aakash Doshi, global head of gold and metals strategy at State Street Investment Management. Looking back at weekly data from the 1980s onwards, silver prices have been significantly more volatile compared with gold and with the S&P 500 SPX, while gold during that same period has been less volatile than equities, he said.

Silver has thinner financial liquidity and a smaller physical market in dollar terms, and it's driven more by "pro-cyclical growth narratives and can suffer larger drawdowns during volatility spikes," he said.

Libertas's Koos also pointed out that lot more short-term traders, hedge funds and leveraged players are involved in the silver market, so when prices start moving, those positions have to adjust, and quickly, which can exaggerate the move in prices.

Gold, meanwhile, can also be used as a liquidity hedge but is more of a "core portfolio holding vis-à-vis silver," and the rise of central-bank gold demand lifts the gold price floor and dampens downside volatility for the yellow metal, Doshi said.

That's because gold is owned more by central banks, institutions and longer-term allocators, so it doesn't react as much to short-term developments, according to Koos.

So while the macroeconomic backdrop can be the same for both gold and silver, the metals have what Koos referred to as two "very different personalities."

Taking a look at the bigger picture for the precious metals, silver may have climbed too far, too fast, but gold prices may still be more likely to rise than to fall.

After the correction in precious-metals prices in late January and early February, gold appears to have found some "dip-buying and support" at the $4,500- to $5,000-an-ounce level, Doshi said. Over the next six to 12 months, he believes gold is more likely to climb to $6,000 than it is to fall to $4,000 an ounce.

It still could be a bumpy path in the very short term, he said, "given the recent spike in market volatility, de-risking and de-leveraging, and demand for liquidity."

Volatility, meanwhile, is more visible in silver, which entered a bear market after its historic run-up in January, Doshi said.

Read: Silver plunges into a bear market for the first time since 2022. Here's how long it may last.

For the white metal, the price probably got ahead of fundamentals - and $70 to $80 an ounce makes "more sense" than $110 to $120 an ounce from a fundamental standpoint, he said.

-Myra P. Saefong

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02-05-26 1452ET