Silver Crashes 35%, Gold Falls 12% as Precious Metals Bubble Bursts

Silver's parabolic rise came to a violent end on Friday, plummeting 35% from its intraday high of $120 per ounce to $75. Gold, which had never seen $5,000 until this week, crashed 12% from $5,600 to $4,718. It's the most brutal precious metals selloff since the Hunt Brothers' silver manipulation collapsed in 1980.

The Bubble That Couldn't Last

The precious metals mania had all the hallmarks of a speculative frenzy. Silver had gained nearly its entire January rally in just weeks, while gold shattered psychological barriers with seemingly unstoppable momentum. Platinum fell 24% and palladium dropped 20%, confirming this wasn't isolated to the monetary metals.

The trigger appears to be President Trump's nomination of Kevin Warsh to replace Jerome Powell as Federal Reserve chair. Warsh's reputation as a relative hawk sent shockwaves through markets betting on continued monetary accommodation. The nomination coincided with a broader risk-off sentiment, with the Nasdaq down 1.25% and the S&P 500 falling 0.9%.

Paul Howard, director at trading firm Wincent, captured the moment: "Cryptocurrency markets have been the victim of risk capital flowing into the still popular commodities trade." That dynamic, he suggests, is now reversing.

Bitcoin's Moment of Truth

While precious metals imploded, bitcoin demonstrated relative stability. Trading around $83,000, it's held well above Thursday's panic low of $81,000. For crypto bulls who theorized that bitcoin couldn't rally until money flowed out of red-hot commodities, this could be the test of their thesis.

Options markets are already showing increased interest in upside exposure, with 105,000 BTC calls among the most actively traded contracts for February expiry. "The outlook indicates what a lot of crypto traders are feeling right now — that their market is long overdue a commodity-style catch-up," Howard noted.

The contrast is striking: while precious metals traders experienced Hunt Brothers-level volatility, crypto markets — typically the poster child for extreme price swings — appeared almost sedate by comparison.

Winners, Losers, and What's Next

The precious metals crash creates clear winners and losers. Leveraged long positions in silver and gold likely faced catastrophic losses, while short sellers and those who took profits near the highs are vindicated. Industrial users of silver and gold may benefit from lower input costs, though the volatility itself creates planning challenges.

For bitcoin and broader crypto markets, the question becomes whether this marks the beginning of significant capital rotation. Crypto has underperformed during the commodities boom, with many arguing that the same inflation fears driving precious metals should logically benefit digital assets even more.

Howard's assessment suggests this rebalancing may be starting: "What was meant to be a bullish move for the markets appears to have coincided with a broad risk sell-off. The reaction may be more of a knee-jerk as markets recalibrate."