Silver prices collapsed anew on Thursday, snapping a brief rebound and reigniting concerns that the precious metals complex is undergoing a deeper and more disorderly adjustment. The metal plunged as much as 16.5% intraday, briefly trading near $73.5 an ounce, as renewed selling pressure overwhelmed hopes that dip buyers would stabilize the market. The move comes after weeks of historic volatility, forcing investors to reassess both their positioning and assumptions about the durability of the rally that carried silver to record highs in January.

Dollar Strength and Fed Expectations Reassert Control

The immediate catalyst for the renewed slide was a sharp recovery in the U.S. dollar, driven by increasingly hawkish signals from the Federal Reserve. Investors have begun to price in a slower pace of interest-rate cuts, following commentary that suggests policymakers remain cautious about easing financial conditions too quickly. The prospect of tighter liquidity and higher real rates tends to weigh heavily on non-yielding assets such as silver, amplifying downside moves when sentiment turns.

Adding to the pressure, markets continue to digest the implications of Kevin Warsh’s nomination as the next Fed chair. Warsh is widely perceived as favoring a smaller central bank balance sheet and a more restrained approach to rate reductions. Even if long-term policy outcomes remain uncertain, the psychological impact on markets has been significant, prompting rapid unwinding of leveraged positions that had built up during the rally.

Volatility Exposes a Crowded Trade

Silver’s price action highlights how crowded the trade had become. The metal had surged more than 130% over the past year, attracting speculative inflows from retail investors, momentum funds, and options traders. That accumulation created a fragile structure, where modest shifts in macro expectations could trigger outsized moves.

The failure of the recent rebound to hold has reinforced the view that forced selling is still working its way through the market. Margin calls, higher volatility requirements, and risk limits at trading desks are likely accelerating the retreat. In this environment, traditional technical levels offer little protection, as liquidity thins and price discovery becomes erratic.

Industrial Demand Versus Financial Flows

Unlike gold, silver occupies a dual role as both a financial asset and an industrial input. It remains critical for electronics, solar panels, and other advanced manufacturing applications. Structurally, long-term demand tied to energy transition technologies has not disappeared. However, in the short term, financial flows are dominating price behavior, overwhelming fundamentals.

Major producing countries such as Mexico, Peru, and China continue to supply the market, but physical considerations have taken a back seat to macro forces. The contrast between silver’s steep short-term losses and its still-elevated year-on-year performance illustrates a market struggling to reconcile powerful secular narratives with tightening monetary and financial conditions.

What Investors Should Watch Next

Looking ahead, the key question is whether volatility subsides enough to allow longer-term buyers to re-emerge. Much will depend on the trajectory of the dollar, incoming U.S. economic data, and clarity around the Fed’s policy path. Any renewed geopolitical shock could revive safe-haven demand, but without confirmation from rates and currency markets, rallies may remain fragile.

For now, silver appears trapped in a transition phase, shifting from speculative excess toward a more balanced valuation. The process, however, is proving far more painful than many investors anticipated.