Silver’s 26% crash last week was the sharpest one-day fall in nearly 50 years, while gold saw its steepest drop since 2013. But strategists at UBS say investors shouldn’t confuse violent price action with the end of the bull market.
In silver’s case, the price collapse followed a period of wild intraday swings, driven in part by “an extreme surge in volatility” and elevated positioning.
Futures market volatility jumped to 115%, triggering a spike in margin requirements by CME Group.
What caused the market to reprice silver so violently? As strategists Dominic Schnider and Wayne Gordon noted, the starting point was critical, with silver prices up 250% year-on-year prior to the correction.
They noted that what they call traditional fundamental drivers of higher prices, such as ETF silver purchases and net speculative positions in the US futures market, were "already in retreat".
The nomination of Kevin Warsh as the new Federal Reserve chair to replace Jerome Powell spooked markets due to the former's reputation for monetary hawkishness.
also "eased the tail risk concerns that had previously supported the market, in our view", the strategists said, with gold and precious metals sector having "served as a preferred asset for investors worried about Fed independence" for several quarters.
UBS has a long-term silver forecast of $85/oz, but adds, “an asset exhibiting 60-120% volatility requires an expected return of 30-60% to go long, which is not yet the case.”
In short, silver needs to fall further before it becomes attractive again from a risk-reward perspective.
Still, UBS sees opportunity in selling downside risk for yield, warning such options strategies carry high risk and must be carefully sized.
Gold, meanwhile, fell 12% intraday on Friday after Donald Trump nomination of Warsh, but UBS says his nomination does not spell the end of gold’s bull market.
“This is not 1980 and Warsh is not Volcker,” the stragetists said.
Despite the dramatic move, gold is still up 13% in 2026. UBS maintains its mid-year target of $6,200/oz and calls gold an “attractive hedge.”
It believes the current sell-off resembles a mid-cycle correction rather than a final top.