Silver skyrockets to $117, hitting a new high before crashing instantly! Gold breaks 5000, triggering a fiat currency crisis

Silver recorded its largest single-day gain since the 2008 financial crisis, soaring 14% to reach $117 before sharply falling over 7%, then rebounding above $110. Gold broke through $5,111 to hit a record high and stabilized around $5,100. A sell-off in Japanese bonds triggered currency depreciation trades, causing the gold-silver ratio to fall to 50, a one-year low, with Harrys warning of overbought risks.

Silver’s Most Violent Intraday Reversal Since 2008

Silver prices are recovering from the most intense intraday reversal since the global financial crisis. During Monday’s trading session, silver surged 14% to break $117, hitting a new all-time high, but then sharply retraced most of the gains in late US trading, with a maximum decline of over 7%. Such extreme volatility is rare in the silver market; the last time such a dramatic single-day swing occurred was during the 2008 Lehman Brothers collapse and the ensuing global financial crisis.

After falling near $103, silver found strong support during Asian trading hours, with buyers actively entering the market, pushing prices back above $110, reducing the decline to below 5%. This V-shaped reversal indicates that long-term demand for silver remains robust, but also reveals a large-scale retreat of short-term speculative funds. Technical analysts note that the $103 level served as a key psychological support, close to the resistance level before Monday’s open, now turned into support.

The extreme volatility in silver reflects a broader crisis of confidence in fiat currencies and government debt. Compared to gold, silver has both monetary and industrial attributes, leading to more volatile price swings. When investors flock to precious metals for safety, silver often rises alongside gold but with larger gains. Conversely, during market reversals, silver’s selling pressure can be even more intense. This characteristic makes silver a high-risk, high-reward investment.

The timing of this surge and plunge is noteworthy. Monday coincided with multiple macroeconomic uncertainties: a large sell-off in Japanese bonds, a continued decline in the US dollar index, and market doubts about the Federal Reserve’s policy independence. In this context, as a smaller precious metals market, silver is more susceptible to rapid large capital inflows and outflows, causing sharp price swings. Trading volume data show that Monday’s silver futures volume surged over 300% above the 30-day average, indicating significant speculative activity.

Deep Logic Behind Gold Breaking $5000

Gold prices, after reaching a new high of $5,111.07 per ounce, have pulled back and are now stable around $5,100. Breaking the $5000 mark is highly symbolic, marking the first time gold has crossed this psychological level and signaling a new phase in the bull market. Unlike the violent swings in silver, gold has shown relatively stable performance after hitting a new high, indicating that institutional investors’ long-term allocations to gold remain strong.

The core driver of gold’s surge is intensified currency depreciation trades. Amid growing fiscal concerns, investors are rushing to sell currencies and government bonds, shifting into what is perceived as the “ultimate currency”: gold. Max Belmont of First Eagle Investment Management notes that historically, gold acts as a barometer of market anxiety, hedging against unexpected inflation, market crashes, and geopolitical conflicts. The current gold price trend is validating this view.

Last week’s large sell-off in Japanese bonds highlighted concerns among developed economies about rising government spending. The yield on Japan’s 10-year government bonds soared over 50 basis points in just a few days, an extremely rare move in Japanese bond history. The sell-off reflects doubts about whether the Bank of Japan can sustain its ultra-loose monetary policy and concerns over Japan’s debt sustainability.

The US dollar index has fallen nearly 2% over the past six trading days, further boosting dollar-denominated gold prices. Market speculation suggests the US may intervene to support the yen, which has heightened fears about the Fed’s independence and unpredictability of Trump administration policies. If the US intervenes in forex markets to support the yen, it would signal a new phase of currency wars among major economies, further increasing demand for safe-haven assets like gold.

Long-term, breaking $5000 could just be the beginning. Several investment banks have raised their gold target prices to $5500 or even $6000. These forecasts are based on assumptions such as continued central bank gold purchases, escalating geopolitical risks, and declining confidence in fiat currency systems. If these assumptions hold, gold prices could continue rising over the next 12 to 18 months.

The Gold-Silver Ratio Falling Below 50 Sends Key Signals

The gold-silver ratio is currently at 50, well below the 100 level from a year ago, a highly significant technical signal. The ratio indicates how many ounces of silver can be exchanged for one ounce of gold. Historically, it has fluctuated widely, from 15 to 100. When the ratio declines, it suggests silver is outperforming gold, often during periods of strong industrial demand or speculative fervor.

A drop from 100 to 50 means silver has doubled its performance relative to gold over the past year. This extreme performance reflects strong demand for silver and hints at potential overbought risks. Historical data shows that when the ratio falls below 50, silver prices often face corrections. During the silver bubble burst in 1980, the ratio briefly dropped to 15, followed by an over 80% crash in silver prices. While current conditions differ from the 1980s, this history warrants caution.

Refiner Harry’s Precious Metals warns that this rally may be overextended, citing technical indicators showing overbought conditions. The Relative Strength Index (RSI) on the daily chart has broken above 70, entering overbought territory, with silver’s RSI approaching 80, indicating significant short-term correction risk. Bollinger Bands show silver prices deviating more than two standard deviations from the middle band, a pattern historically associated with sharp reversals.

Claudio Wewel of J. Safra Sarasin warns that due to silver’s higher volatility, it tends to suffer larger retracements than gold after prolonged rallies. Statistically, when silver gains over 10% in a short period, there is over a 70% chance of a 5% or greater correction within the next 30 days. Monday’s 14% surge exceeds this threshold, increasing short-term correction risks.

However, some analysts interpret the sharp decline in the gold-silver ratio as a sign of improving fundamentals for silver. The global energy transition has driven industrial demand for silver, especially in solar panels and electric vehicles. Limited supply growth, with major silver-producing countries’ output remaining flat over the past two years, supports long-term prices. The widening supply-demand gap could sustain silver’s strength, and the ratio may stabilize at lower levels for some time.

Key Levels and Future Outlook

Whether silver can retake the $110 level is crucial for near-term momentum. Technical analysis shows $110 as a key battleground. If silver can hold above $110 and rebound toward Monday’s close of $115.50, a V-shaped rally could form, attracting trend followers and pushing prices toward $120 or higher.

Conversely, a break below $105 would signal potential for a larger correction. The next support is at the psychological $100 level. If that level is broken, silver could accelerate downward toward $95, the previous rally’s starting point, which offers strong technical support. Traders should watch volume signals; a decline below key supports on high volume often indicates trend reversal.

The market is currently awaiting Trump’s nomination of the Fed Chair and this week’s FOMC decision, with expectations that the Fed will pause rate cuts. If the FOMC signals hawkishly, indicating rates will stay high longer, the US dollar could rebound, pressuring dollar-denominated silver and gold. Conversely, if the Fed shows concern about economic slowdown or hints at resuming rate cuts, precious metals could gain renewed upward momentum.

In the longer term, the precious metals market is undergoing structural changes. Central banks’ continued gold accumulation, rising geopolitical risks, and declining confidence in fiat currencies could support high prices for years. However, extreme short-term volatility reminds investors that precious metals are not a one-way safe haven; risk management and position control are essential.