Silver ETF Plunges in Historic Market Shakeout

iShares Silver Trust US46428Q1094

Trading in the iShares Silver Trust (SLV) remains turbulent this Monday following one of the most severe single-day collapses in recent commodity market history. The dramatic sell-off, triggered late last week, has forced investors to reassess their positions in the precious metals sector. A sharp and sudden rally in the U.S. dollar sparked a wave of liquidations that rattled silver and related assets.

The catalyst for Friday’s plunge was President Trump's nomination of Kevin Warsh to lead the U.S. Federal Reserve. Market participants interpreted this personnel choice as a "hawkish" signal, anticipating tighter monetary policy and a stronger dollar ahead. Silver, known for its significantly higher volatility compared to gold, proved exceptionally sensitive to this rapid revaluation of dollar-denominated assets.

The scale of the decline was historic:
* The spot price for silver crashed from above $121 to below $85 per ounce.
* The iShares Silver Trust (SLV) itself plummeted by as much as 29% during Friday's session.
* This marked the most severe single-day loss for the metal since 1980.

Monday's Attempted Recovery and Structural Concerns

While volatility persists, early trading on Monday showed tentative signs of stabilization. At one point, silver prices fell another 9%, but later managed to pare those losses and were last seen trading marginally higher, up approximately 0.5%.

Analysts note that structural trading issues exacerbated the panic. Reports indicate that price quotes on the Shanghai exchange were not updating in real-time during the height of Friday's crash, amplifying uncertainty and widening trading spreads. Experts at Wells Fargo have characterized the event as a necessary "washout" of speculative positions built up in the market. Despite the brutal correction, silver maintains a substantial gain over a twelve-month horizon.

Leveraged Products Amplify Losses

The downturn highlighted the stark contrast between physically-backed funds and their leveraged counterparts. While the iShares Silver Trust, which holds physical bullion in vaults, recorded heavy losses, derivative-based products faced a catastrophe.

The ProShares Ultra Silver ETF (AGQ), designed to deliver twice the daily movement of silver, collapsed by roughly 60% on Friday. This disparity underscores the unique risks of such instruments: unlike the SLV, funds like the AGQ must rebalance their positions daily. This mechanism forced them to sell billions of dollars worth of exposure in a falling market, a process that likely accelerated the downward spiral.

Fundamentals and Path Forward

Beneath the technical turmoil, the fundamental case for silver remains intact. Industrial demand from sectors like artificial intelligence and electronics continues to provide underlying support. Morgan Stanley analysts have pointed out that the potential leadership change at the Fed is unlikely to radically alter monetary policy in the immediate term.

For investors, the critical question now is whether the $75 to $85 price zone can establish itself as a new support level. With broader equity markets demonstrating resilience today, the intense panic that gripped the metals complex appears, for the moment, to be contained.