Silver drops $7 intraday, revealing the truth behind the liquidity crisis in the precious metals market

【BlockBeats】Last week, silver’s price movement became the market’s focus, soaring strongly all the way. Rumors of short squeezes and margin calls pushed the price higher at the end of last Friday, but the good times didn’t last long — people are now starting to calm down.

Yesterday, silver fell more than $7 in a single day, marking the largest nominal single-day decline in its history. Gold was not spared either, experiencing a similar profit-taking pullback, with a intraday drop of about 4%.

The underlying reason is actually quite simple. The precious metals market is fundamentally driven by sentiment. When sentiment reverses, the downward momentum can be fierce. What’s more painful is that the market is currently in a very tricky trading phase — overall liquidity is generally low, which directly amplifies price volatility. Hedge funds are now hesitant to go against the trend to hedge excessive market movements, and market makers are also pulling back. Without the participation and buffering of these institutions, prices are like wild horses running free; a single negative news can create a deep pit.