Why Silver Collapsed 37% on Friday: 3 Key Reasons Behind the Biggest Single-Day Crash in History

Silver prices witnessed an unprecedented collapse on Friday, January 30, marking the biggest single-day fall on record. Spot silver plunged 37%, while futures crashed 31%, levels not seen since March 1980. From record highs above $120 earlier this week, prices slid sharply to $84 in a single session, rattling global commodity markets and silver-linked ETFs.

Silver Records Its Biggest One-Day Crash Ever

Spot Silver prices plunged 37% on Friday, January 30, marking their biggest single-day fall on record. Futures markets were not spared either, with prices tumbling 31%, the steepest decline since March 1980.

After touching record levels of over $120 earlier this week, silver prices collapsed to $84 in a single session, wiping out weeks of gains within hours.

The sell-off was even more brutal for exchange-traded funds:

• ProShares Ultra Silver ETF crashed 60% in one trading session

• iShares Silver Trust ETF plunged 29%

For both ETFs, it marked the worst trading day on record.

What Triggered the Massive Silver Sell-Off?

Multiple forces converged to spark the overnight crash in silver prices. Among them, three factors stood out as the most critical drivers.

Kevin Warsh’s Appointment as Fed Chair

An important part of the rally in precious metals through 2025 and January stemmed from concerns about the independence of the US Federal Reserve. These fears intensified amid US President Donald Trump’s repeated demands for interest rate cuts and his public criticism of outgoing Fed Chair Jerome Powell, at times suggesting he could remove him.

Until last week, market speculation suggested that White House National Economic Council Director Kevin Hassett would be chosen as the next Fed Chair, a pick seen as aligned with the administration’s preference for lower interest rates.

However, Trump instead selected former Fed Governor Kevin Warsh as the new Fed Chair on Friday.

Warsh is widely known for strongly advocating central bank independence and is regarded as an “inflation-hawk.”

Trump’s decision helped ease near-term fears about political interference in monetary policy. This development proved indirectly negative for precious metals like Gold and Silver, which do not offer interest income.

Lower interest rates typically support non-yielding assets. As those expectations weakened, silver prices reacted sharply.

US Dollar Stages Sharp Reversal

A weak US Dollar, combined with Trump’s stated preference for a softer currency, had been a key driver behind the rally in Gold and Silver earlier this month.

That trend reversed dramatically following Warsh’s appointment.

The US Dollar recorded its biggest single-day gain since May last year, pushing the Dollar Index back above 97. The rebound reflected easing concerns over the Fed’s independence and reduced expectations of aggressive rate cuts.

A stronger dollar is traditionally negative for precious metals, as Gold and Silver are priced globally in US Dollars. This makes them more expensive for foreign buyers, reducing demand.

Additionally, higher interest rates reduce the appeal of non-interest-yielding assets like Silver, adding further pressure on prices.

Technical Triggers and Position Unwinding

Overbought Market Conditions

Technical indicators had been flashing warning signs well before the crash.

The Relative Strength Index (RSI) for both Gold and Silver had moved deep into “overbought” territory. An RSI reading above 70 typically signals overbought conditions. During the rally, Silver’s RSI surged above 80, indicating extreme price stretch.

Hedge Funds Cut Long Positions

Profit-taking intensified as prices began to fall.

US government data released on Friday showed that hedge funds and large speculators reduced net-long positions in Silver by 36%, bringing them down to 7,294 contracts for the week ending January 27. This marked the lowest level in 23 months.

Margin Hikes and Forced Liquidation

Other factors that likely accelerated the sell-off include:

• Increase in margin requirements

• Forced liquidation of speculative positions

• Aggressive profit booking after the rapid rally

As selling gained momentum, it triggered a cascade of stop-loss orders and margin calls, intensifying the decline.

Expert Commentary on the Silver Crash

"It’s like one of those excuses markets are waiting for to unwind those parabolic moves," Christopher Wong of Oversea-Chinese Banking Corp. wrote in a note, referring to Warsh's nomination as the new Fed chair.

Commerzbank AG noted that the size of the correction indicates traders were simply waiting for an opportunity to book profits after silver’s sharp rise. However, the bank added that while Warsh’s appointment eased some independence concerns, the Federal Reserve “will yield to pressure to at least some extent and cut interest rates more than is currently being priced in.”

Silver Breaks Key Technical Levels

The steep fall pushed silver prices below all major moving averages, signaling further near-term volatility.

"We need to prepare for the roller-coaster to continue though," said Dominik Sperzel, head of trading at Heraeus Precious Metals.