Silver Rises After Biggest One-Day Drop in More Than Five Years

Core Viewpoint - Silver has recovered most of its losses after experiencing its largest one-day drop in over five years, driven by a persistent supply shortage that is expected to result in a 33% monthly gain for the metal [1]. Group 1: Market Movements - Silver prices climbed above $75 an ounce following a 9% decline in the previous session, while gold also saw a slight increase after its steepest drop in two months [2]. - The recent selloff in precious metals was attributed to technical factors, including early profit-taking, unwinding of leveraged long positions, and tighter margin requirements [3]. - Exchanges have raised margin requirements for certain Comex silver futures contracts to manage heightened volatility, forcing some traders to reduce or close their positions [4]. Group 2: Investor Behavior - Speculative investor interest in China has significantly influenced silver prices, with elevated buying in the Shanghai Gold Exchange's silver contract leading to record-high premiums [5]. - The silver rally this year is characterized by real metal scarcity, with physical deficits and policy-driven supply restrictions increasingly dictating market prices [8]. Group 3: Annual Performance - Despite recent pullbacks, both gold and silver are on track for their best annual performances since 1979, supported by strong central bank purchases and inflows into exchange-traded funds [6]. - Lower borrowing costs due to three successive rate cuts by the US Federal Reserve have provided a favorable environment for commodities like silver and gold, which do not yield interest [6].