Silver has entered what analysts describe as a historically dangerous zone after suffering a dramatic collapse from recent highs. Over the past two days alone, silver has fallen roughly 36–38% from its peak price of $122 to around $78, marking one of the most abrupt selloffs in the metal’s modern history.
The speed of the decline has rattled traders and revived comparisons with past boom-and-bust cycles. At one point during intraday trading, silver plunged by nearly 39%, the largest intraday drop ever recorded. The violent move highlights the extreme volatility now gripping precious metals markets.
Yet despite the turmoil, silver ended the month with a gain of approximately 19%, extending its winning streak to nine consecutive months – a rare and conflicting signal for investors.
Why technical indicators are flashing red
Analysts point to silver’s monthly relative strength index as a key warning sign. Prior to the selloff, the monthly RSI surged to 95, the second-highest reading in more than 60 years of data. Such levels indicate extreme overbought conditions and have historically preceded major market reversals.
This level has appeared only twice in modern history. In the 1979–1980 silver bubble, the monthly RSI climbed above 90 before prices ultimately collapsed by nearly 90% from their peak. A similar pattern emerged during the 2009–2011 rally, when RSI reached extreme levels and silver later fell roughly 65% from its high to the eventual low.
In both cases, the initial sharp decline did not mark the bottom. Prices continued to correct well after the first wave of selling, as speculative positioning unwound and liquidity thinned.
Analysts say the current setup closely resembles those prior episodes, raising the risk that the recent plunge may represent only the first phase of a broader correction.
What the volatility means for investors
The current episode presents a paradox. On one hand, silver has just suffered the largest intraday drop in its history and erased more than a third of its value in days. On the other, it remains firmly in an uptrend on a longer-term basis, having posted nine consecutive monthly gains.
For investors, the message is mixed but clear on risk. Extreme upside momentum has given way to equally extreme downside volatility, suggesting that leverage and speculative excess have reached destabilizing levels.
While long-term fundamentals such as industrial demand and macro uncertainty may continue to support silver, analysts warn that technical damage of this magnitude often requires time to heal. Further downside and prolonged consolidation are common after such historic RSI extremes.
As previously covered, modern precious metals markets are increasingly influenced by derivatives, algorithmic trading, and crowded positioning, amplifying both rallies and selloffs. That dynamic raises the likelihood of continued sharp swings in the weeks ahead.
Whether silver ultimately stabilizes near current levels or retraces further will depend on how quickly speculative positions are cleared and whether physical demand can absorb the shock. What is clear, analysts say, is that this episode is already one for the history books and one that investors will be studying for decades.