Silver's Wild Ride: How Chinese Speculation Fueled a Historic Rally and a Brutal Crash
The silver market has experienced a breathtaking surge and a precipitous collapse within weeks, offering a stark lesson in the power—and fragility—of speculative fervor. The white metal, which had dramatically outpaced gold, has now given back the bulk of its gains, with the sell-off tracing directly to overheating retail activity in China.
After a staggering 170% rally in 2025, silver prices climbed another 60% in early 2026, peaking at an unprecedented $121 per troy ounce. The euphoria was short-lived. By Monday, spot silver had plunged to around $77.10, wiping out a historic advance in a matter of sessions. Friday alone saw a gut-wrenching 36% drop as investors stampeded for the exits.
The trigger for the unwind was a shift in macroeconomic expectations following former President Donald Trump's announcement of Kevin Warsh as his nominee for Federal Reserve Chair. This sparked a rapid reassessment of the interest rate outlook, rattling leveraged markets. However, analysts point to China as the epicenter of the volatility, where warning signs had been flashing for days.
"We saw clear cracks in the foundation before the collapse," noted Fabien Yip, market analyst at IG. "Reports of Chinese investors struggling to withdraw funds from leveraged accounts and domestic funds halting subscriptions to cool sentiment were major red flags."
In response, exchanges like the CME Group and the Shanghai Gold Exchange raised margin requirements—a classic move to curb speculation that often forces overextended traders to liquidate, accelerating the downturn. "Margin calls on leveraged positions acted as a turbocharger for the sell-off," Yip added.
The rally, driven largely by physical demand for coins and bars and "strong and persistent" Chinese buying, had long divorced from fundamentals, according to Saxo Bank's head of commodity strategy Ole Hansen. When the speculative bid vanished, the fallout spread to copper and platinum. Even gold, which hit records above $5,500 an ounce last week, retreated to around $4,612.
Markets are now nervously watching China, with the extended Lunar New Year holiday posing a fresh risk. Thin liquidity during the break could set the stage for another wave of volatility when trading resumes.
Market Voices: Reactions to the Rollercoaster
Michael Chen, Portfolio Manager, Hong Kong: "This was a classic bubble fueled by accessible leverage and narrative-driven retail trading. While painful, it's a necessary correction that restores some sanity to pricing. The structural industrial demand story for silver remains, but it was utterly overshadowed."
Sarah Wilkinson, Independent Precious Metals Trader, London: "The sheer speed of the crash was terrifying. It exposes the systemic risk posed by uncoordinated, speculation-first markets. Global exchanges and regulators need to review margin frameworks to prevent such destructive whipsaws, which undermine confidence in the entire complex."
David Rossi, Retail Investor Forum Moderator: "It's absolute robbery disguised as a 'market correction.' The little guys followed the hype, and then the big venues changed the rules mid-game by hiking margins, forcing us out. They let the bubble inflate and then pulled the rug. When do the institutions ever face a margin call like that?"
Professor Aris Kaloudis, Economic Historian: "We've seen this script before, from tulips to tech stocks. The China factor is the new variable—a massive, digitally-connected retail base can amplify global moves faster than ever. This isn't just about silver; it's a blueprint for future commodity shocks."