Gold and silver plunge, suffering their worst losses since the 1980s
Gold and silver suffered their worst losses in decades on Friday, with the iShares Silver Trust falling more than 30% at one point during afternoon trading before recovering slightly.
After recently crossing $5,000 per ounce for the first time, gold’s dip was relatively muted compared to silver’s rout, but nevertheless eye-watering for a traditional safe haven asset. At one point, gold’s intraday dip exceeded 10%, its worst intraday drop since the 1980s and surpassing its declines seen during the 2008 financial crisis, per Bloomberg.
Silver’s drop was its worst in percentage terms since 1980.
Gold, and particularly silver, have been pushed higher recently by a storm of retail trader enthusiasm for the metals, as well as more traditional drivers of precious metals such as geopolitical risks and concerns over a fall in the dollar’s value due to trade wars and possibly waning central bank independence.
Leveraged ETFs that hold gold and silver futures have become increasingly popular trading vehicles amid the parabolic moves in precious metals prices, and likely contributed to the magnitude of the unwind today.
Case in point: look at silver futures for delivery in March. That’s the dominant contract held by the ProShares Ultra Silver ETF, which offers exposure to 2x the daily move in the shiny metal. Volumes exploded (and the contract rebounded modestly) right around 1:25 p.m. ET, which is when silver futures settled and around the time the ETF performed its daily rebalancing (which in this case, involved massive selling).
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