Silver tumbles 30% below $80 after worst-ever sell-off triggered by liquidity wipeout

Silver suffered one of the sharpest collapses in modern commodity market history on Friday, plunging as much as 30% globally and nearly 27% on India’s MCX in what analysts described as a brutal “liquidity wipeout” triggered by a toxic mix of macro shocks, extreme leverage and technical exhaustion.

On the Multi Commodity Exchange (MCX), Silver March futures crashed Rs 1,07,968 per kilogram, or 27%, to settle at Rs 2,91,925 — the steepest single-day fall ever recorded for the metal in India. The plunge dragged prices below the ₹3 lakh mark just a day after silver had surged to an all-time high near Rs 4 lakh per kg.

Overseas, the carnage was even more dramatic. Spot silver prices plunged as much as 37% on Friday, January 30, marking the largest single-day decline on record. COMEX silver futures slumped over 30%, their worst fall since March 1980, collapsing from record highs above $120 an ounce earlier in the week to nearly $80 in a single trading session.

The rout extended to silver-linked exchange traded funds (ETFs) in the US, where leveraged exposure magnified losses. The ProShares Ultra Silver ETF crashed nearly 60% in one session, while the iShares Silver Trust ETF plunged 29%, both suffering their worst day on record.

Fed appointment sparks macro reversal

Market participants widely pointed to a sudden shift in US monetary expectations as the key trigger. The sell-off followed President Donald Trump’s decision to appoint former Federal Reserve governor Kevin Warsh as the next Fed Chair. Warsh is regarded as an inflation hawk and a strong proponent of central bank independence, in contrast to market speculation that a more dovish, politically aligned candidate would be chosen.

“The nomination of Kevin Warsh triggered a sharp macro re-pricing,” said Ponmudi R, CEO of Enrich Money. “The US dollar strengthened, real yields moved higher, and leveraged positions in gold and silver — which had become stretched debasement hedges — unwound violently.”

The US dollar index posted its biggest single-day gain since May last year, rebounding above the 97 mark. A stronger dollar and rising yields typically weigh on precious metals, which offer no interest income and are priced globally in US currency.

“A lot of the rally in silver was built on expectations of aggressive rate cuts and concerns over Fed independence,” said Christopher Wong, FX strategist at Oversea-Chinese Banking Corp. “Once that narrative cracked, the market was waiting for an excuse to unwind parabolic positions.”

Overbought conditions amplify the fall

Technical factors played a major role in accelerating the crash. Silver had been trading deep in overbought territory, with the Relative Strength Index (RSI) climbing above 80 during the rally — levels that often precede sharp corrections.

US government data released on Friday showed hedge funds and large speculators slashed their net long positions in silver by 36% to 7,294 contracts in the week ended January 27, the lowest level in 23 months. Analysts said once prices began slipping, margin calls, algorithmic selling and forced liquidation intensified the decline.

“The magnitude of the correction suggests investors were simply waiting for an opportunity to book profits after the rapid price rise,” Commerzbank AG said in a note. However, the bank added that the Federal Reserve may still “yield to political pressure to some extent and cut rates more than currently priced in.”

Gold dragged lower, silver hit harder

Silver’s collapse spilled over into gold markets, though gold proved relatively more resilient. Spot gold fell nearly 5% to about $5,143 an ounce, while MCX gold February futures tumbled 12%, or ₹20,514, to close at ₹1,50,440 per 10 grams.

“Gold and silver experienced a significant correction as investors aggressively booked profits after a record-breaking rally,” said Saumil Gandhi, Senior Analyst – Commodities at HDFC Securities. “The decline was driven by heavy liquidation of long positions by institutional players and further pressure from a recovering US dollar.”

From a technical standpoint, both metals were vulnerable, Gandhi added. “They had been trading in overbought territory for several sessions, heightening the risk of a sharp corrective move.”

Correction, not a trend reversal

Despite the severity of the sell-off, several analysts stressed that silver’s longer-term bullish structure remains intact, supported by structural supply deficits and rising industrial demand.

“Silver offers a double edge — it is both a precious metal and a critical industrial input,” said Aamir Makda, Commodity and Currency Analyst at Choice Broking. “Demand from solar energy, electronics, EVs and medical technology remains strong, and supply deficits seen over the past five years are likely to persist into 2026.”

Ponmudi of Enrich Money echoed that view, describing the crash as “a classic euphoria-to-exhaustion phase rather than a structural bear market reversal.”

“This correction flushed out excess leverage and speculative froth,” he said. “Near-term volatility may persist, but the secular bullish trend for silver remains intact.”

Notably, despite Friday’s historic plunge, silver still closed January with gains of around 19%, extending its rally to a ninth consecutive month — a reminder that even the strongest bull markets are rarely linear.