China's speculative traders sent silver soaring and crashing in a volatile run

• Silver's white-hot rally is unraveling after traders rushed to lock in profits, sending prices sharply lower.
• A China-driven speculative surge and surprise Fed news jolted the market, triggering a rapid selloff.
• Rising margin requirements are adding to ongoing market instability.

Silver prices crashed in a harrowing roller-coaster ride that underscored how quickly China's army of speculators can move global commodity markets — and how fast those gains can unravel.

The white metal has been in the spotlight over the past year after dramatically outperforming gold. Prices surged about 170% in 2025 and climbed more than 60% again in early 2026, vaulting silver to $121 per troy ounce at its peak before the rally spectacularly broke down.

Spot silver was trading around $77.10 per troy ounce at 3:06 a.m. ET on Monday, having erased a large portion of its historic gains in just a few sessions.

On Friday, silver prices cratered as much as 36% as investors rushed to lock in profits following the meteoric rally and adjust positions.

The sell-off came on the back of President Donald Trump announcing Kevin Warsh as his pick for the next Federal Reserve chair. The move rattled markets and sparked a sharp reassessment of interest-rate expectations.

Even before the meltdown, warning signs were flashing in China, where speculative trading had reached frenetic levels, leaving prices vulnerable to a rapid unwind.

"Before the correction, warning signs emerged on Tuesday as Chinese investors faced difficulties withdrawing funds from leveraged gold-trading accounts, and several Chinese funds halted subscriptions to manage overheating sentiment," wrote Fabien Yip, a market analyst at IG, on Monday.

In response to the volatility, major trading venues, including CME Group and the Shanghai Gold Exchange, raised margin requirements. Higher margins require traders to post more cash to hold positions. The move is aimed at cooling speculation but it often forces leveraged investors to sell — adding further downward pressure to prices.

"Price action was magnified by margin calls on leveraged positions, which further intensified selling pressure amongst other traders," Yip said.

Silver's violent price reversal followed recent analyst warnings that silver's rally was running far ahead of underlying fundamentals.

Ole Hansen, the head of commodity strategy at Saxo Bank, wrote last week that the surge was driven largely by retail demand for coins and bars, alongside "strong and persistent demand" from China that pushed silver prices in Shanghai to a widening premium over London benchmarks.

When that speculative demand faltered, the impact rippled across the broader metals complex. The pullback rippled into other metals, including copper and platinum.

Gold, which had also enjoyed a powerful rally, wasn't spared. Spot gold was trading around $4,612 per ounce, after hitting a fresh record above $5,500 per ounce just last week.

Markets are now closely watching trading activity in China for further clues, particularly with risks building ahead of the long Chinese New Year holidays, when markets will be closed.

Thin liquidity during the break could amplify volatility once trading resumes — a prospect that has investors bracing for more sharp moves in the days ahead.