Silver Crashes 35% as Precious Metals Rout Unfolds Whilst Bitcoin Stabilises

Precious metals markets experienced severe losses on Friday, with silver leading a dramatic sell-off that has erased most of the metal's January gains within hours.

Silver prices collapsed from an intraday record of $120 per ounce to $75 during US trading hours, representing a single-day decline of 35%. The metal had rallied substantially throughout January before Friday's sharp reversal.

Gold retreated 12% to $4,718 per ounce after reaching $5,600 on Thursday. The yellow metal had crossed the $5,000 threshold for the first time earlier this week. Platinum and palladium recorded losses of 24% and 20% respectively.

The magnitude of silver's intraday volatility is historically unusual for precious metals markets. Few traders have witnessed such dramatic swings in commodity prices outside the infamous Hunt Brothers episode of 1980, when attempts to corner the silver market led to extreme price fluctuations.

Equity markets also declined, with the Nasdaq falling 1.25% and the S&P 500 dropping 0.9% during Friday's session.

Cryptocurrency markets, which had experienced their own turbulence earlier in the week, demonstrated comparative stability on Friday. Bitcoin traded around $83,000, holding above Thursday evening's low of $81,000. The leading digital asset has maintained its position despite the broader market volatility.

Market participants attributed the latest sell-off partly to President Trump's selection of Kevin Warsh to succeed Jerome Powell as Federal Reserve chair. Analysts characterised Warsh as a relatively hawkish appointment, potentially signalling a more restrictive monetary policy stance that prompted selling across risk assets.

Trading firm Wincent's director Paul Howard suggested the recent commodity rally had diverted capital from cryptocurrency markets. He noted increased activity in bitcoin options markets, particularly calls struck at 105,000 BTC, indicating trader expectations for upside price movement in February.

Howard described the market reaction to Warsh's nomination as potentially reflexive, suggesting participants may be reassessing positions as they adjust to the policy implications of the Federal Reserve leadership change.

The divergence between precious metals and digital assets on Friday marks a notable shift from recent market dynamics, where both asset classes had generally moved in similar directions as inflation hedges.

Industry Impact and Market Implications

Friday's market action highlights the distinct risk profiles between traditional commodities and digital assets, despite their frequent categorisation as alternative stores of value. The relative stability of bitcoin during the precious metals rout may prompt reassessment of cryptocurrency volatility perceptions, particularly given digital assets' historical reputation for sharp price swings.

The commodity sell-off could influence capital allocation decisions across alternative asset classes. If risk capital rotates away from precious metals following the sharp reversal, cryptocurrency markets may attract increased attention from traders seeking asymmetric returns. Options market activity suggests some participants are already positioning for potential bitcoin appreciation in the coming weeks.

The Federal Reserve chair nomination introduces additional uncertainty regarding monetary policy direction. A more hawkish stance could affect liquidity conditions across all risk assets, though the impact on cryptocurrencies remains difficult to predict given their evolving correlation patterns with traditional markets.

The episode underscores ongoing questions about asset class behaviour during periods of monetary policy transition and market stress. Whilst precious metals have historically served as safe haven assets, Friday's volatility demonstrates that rapid price appreciation can create conditions for equally swift reversals, regardless of asset category.

Market infrastructure and liquidity provision in both commodities and cryptocurrency markets will face scrutiny following this week's price action. The ability of different markets to absorb large position adjustments remains a key consideration for institutional participants evaluating exposure across asset classes.