Silver pares losses, but forecasts for a prolonged decline
Silver pared its losses on Monday, February 2, after plunging more than 15% earlier in the session, while futures contracts for the precious metal rose amid mixed expectations regarding the duration of the price correction.
Spot silver fell 3.3% to $81.75 an ounce.
Meanwhile, silver-linked futures rose 0.6% to $79.03. On Friday, it had plunged 28%, its worst day since March 1980.
Silver has fallen by about 32% since hitting an all-time high of $121.64 last week.
Despite the sharp decline, analysts cautioned against interpreting this move as the start of a prolonged downward trend.
Silver had hit a record high of $121.64 an ounce on Thursday before entering a sharp correction.
Silver futures plunged more than 30% on Friday, marking their worst daily performance since March 1980, amid heavy selling and widespread profit-taking.
According to analysts, this decline followed a sharp market reversal on Friday, when optimism about a US interest rate cut was dashed by a surprise reassessment of the Federal Reserve leadership after US President Donald Trump nominated former Federal Reserve Governor Kevin Warsh to succeed Jerome Powell when his term expires in May.
Meanwhile, the price of silver may test its key breakout level, which would mean further declines, according to BTIG.
Jonathan Krinsky, senior market analyst at BTIG, said the metal could see fluctuations in the $80-$100 range after Friday's historic drop. But he predicted it would then fall to around $55, a key level it has since broken through.
“Silver remains highly volatile and is experiencing its worst daily decline ever,” Krensky wrote in a note to clients on Sunday.
Spot silver fell 5% to around $80 an ounce on Monday, still more than 40% above the $55 level BTIG expects it to test. The spot metal had fallen nearly 28% on Friday.
