Silver prices fell sharply by up to 18% on Thursday, ending a two-day rally as the white metal continued to face high price volatility in an uncertain trading environment.
At 3.20pm, silver prices were at $79.551, down 9.57% since it opened in early trading on Thursday in the Asian session.
The fall came after silver recorded a sharp rise before plunging almost 30% last Friday, with this year's performance still showing a surge of around 146%, according to LSEG data.
Analysts stressed that this extreme price movement was driven more by speculative flows, high leverage positions and options-based trading activities, than actual physical demand.
This situation increased the market's sensitivity to any changes in sentiment, thus triggering significant volatility.
While silver demand fundamentals remain strong, driven by its use in solar energy, catalysts and electronics, the market is expected to remain volatile until speculative positions are reduced.
In an effort to curb excessive speculative activity, several global metals exchanges including CME Group have raised margin requirements following the previous sharp decline.
Selling pressure was also accelerated by traders hedging and investors triggering stop losses as prices began to decline, thus accelerating capital outflows from the silver market. This situation resulted in chain selling pressure that further exacerbated the price decline.
The sharper correction in silver prices relative to gold was also associated with tighter liquidity in the London market, which magnified price changes and increased volatility in the short term.
