Silver's volatility has exceeded 100%. Where exactly is the bottom?

Published Thu, Feb 5 202611:42 PM ESTUpdated Fri, Feb 6 202610:14 AM EST

Lee Ying Shan @in/ying-shan-lee @LeeYingshan

Key Points

Silver's wild swings have erased confidence, with volatility exceeding 100% in the near term.
Since the start of the year, silver has recorded 11 moves of 5% or more in either direction.
Major banks see short-term risks but say long-term fundamentals remain supportive.

Silver's recent dizzying plunge and erratic trading this week have left investors wondering: Where and when is the bottom? Spot silver prices slid as much as 10% on Thursday before paring losses to rise above 2% to $73 per ounce as of 11.30 p.m. ET. Silver futures in New York were down over 5% at $72.34 per ounce. Prices of the white metal surged to a record high this year before plunging almost 30% last Friday. Since then, it has struggled to regain footing, rebounding on Tuesday and Wednesday before plunging 19% again on Thursday. Strategists at UBS noted the recent plunge appeared driven more by a broader risk-off move than a collapse in fundamentals, but warned that extreme volatility makes near-term positioning risky. "Since one-month volatility in silver now exceeds 100%, significant price swings are likely in the near term," the bank said in a note published late Thursday. UBS added that silver could struggle to remain above $85 an ounce without sustained investment demand. XAG= 1Y mountain Since the start of the year, silver has recorded 11 moves of 5% or more in either direction, data from LSEG showed. "In light of these factors and the current extreme volatility, we do not find long-term exposure to silver at present levels attractive," the bank's strategists said. However, UBS believes that longer-term fundamentals remain intact. "Lower nominal and real interest rates, global debt concerns and USD debasement considerations, and our expectation for global economic growth to recover in 2026 should drive up prices." The bank continues to estimate a market deficit of nearly 300 million ounces this year, with investment demand expected to surpass 400 million ounces, while warning that elevated prices could curb industrial usage. The sharp rise in option prices has created opportunities for investors to generate income by positioning for a price floor, rather than betting on further gains. With one-month volatility near 80%, UBS said strategies that benefit from silver staying above about $65 an ounce appear more appealing in the near term, effectively reflecting a view that, while prices may remain choppy, a deep collapse below that level is unlikely in the immediate future. Nicky Shiels, head of research at MKS Pamp, said silver's recent behavior bears little resemblance to past bull markets driven by physical supply constraints. "Silver is certainly being labeled as a meme stock or commodity given its outsized volatility," Shiels said, adding that while silver is not cheap in absolute terms, expanded retail access has amplified speculative flows. She expects silver to spend the coming weeks digesting the excesses of the rally rather than staging an immediate rebound, and could go as low as $60 per ounce. OCBC's Vasu Menon maintained that while near-term sentiment has been badly bruised, the structural case for silver remains intact for investors who can stomach the volatility. The bank's managing director of investment strategy said the metal's hybrid nature often leaves it vulnerable during sharp risk-off episodes. "Silver can be viewed as a hybrid asset with characteristics of a precious metal, industrial metal, and elements of speculation," Menon said. "It may seem like a meme asset especially when there is significant retail flows, but still, it should be borne in mind that it has fundamental drivers." Menon's long-term price target for silver stands at $134 per ounce by March 2027. The white metal is widely used in a range of industrial and technological applications, including solar power, catalysts and electronics.