Silver falls around 35% after historic high

ISTANBUL

Silver reached a record of $121.7 per ounce in January but fell 35% to $79 in the second month of the year, amid all precious metals suffering from volatility.

Zafer Ergezen, a futures and commodities expert, told Anadolu that the silver decline was not a big surprise, as all precious metals were down, though silver’s drop was steeper than most, and its volatility continued to remain high, even on Thursday.

Ergezen attributed the recent Fed chair nomination as being the main factor behind the decline in silver.

US President Donald Trump nominated Kevin Warsh for the Fed chair position, a candidate who is perceived as favorable to rate cuts.

“Warsh is a Fed chair candidate who wants to see a reduction in the bank’s balance sheets and less intervention by the bank in the markets, while still maintaining strict fiscal and monetary policies in the economy,” he said.

He explained that silver fell from its historic high largely because Warsh’s nomination raised expectations that the US dollar would not depreciate as much as previously anticipated and that the US Dollar Index might remain relatively strong.

He noted that Warsh's nomination as Fed chair is also expected to reinvigorate the hopes that the debt problem, causing the Fed and the US to lose their credit ratings, will be somewhat resolved.

“This is because the trend in precious metals was actually moving towards safe haven assets amid the decline … in confidence in the US dollar,” he said.

Ergezen noted that margin calls and increased liquidity requirements amplified the decline, as forced sales triggered additional selling.

He added that a portion of the market has already shifted toward safe-haven assets amid uncertainties related to Trump’s policies.

“Trump’s economic and political policies after taking office, the tariff wars, his attack on Venezuela, and his demand for Greenland created a major source of concern in the markets, as investors shifted away from the US dollar,” he said, adding: “Considering this, one might say Trump’s nomination of Warsh could mean he will pursue a more moderate policy to achieve his goals without clashing with the markets, which is calming the markets for now.”

He added that Japan’s bond yields are at high levels due to de-dollarization and the shift towards precious metals, while Trump’s nomination of Warsh has led to some recovery in the US dollar index.

*Writing by Emir Yildirim