Silver prices initially dropped over 10% in the early trading session. After falling below $80, where is the next support level?

Morning trading session saw spot silver plunge to $76.89 per ounce at one point, a decline of over 10%. However, market sentiment quickly reversed, with silver prices rebounding and turning higher. As of press time, it was trading at $79.16 per ounce.

Gold was similarly affected, with London spot gold prices dropping over 3% after opening, briefly breaking below the key support level of $4,500, then rebounding slightly above $4,600.

01 Market Overview

Today (February 2, 2026), silver market volatility has kept global investors on edge. Spot silver opened sharply lower, dropping over 10% at one point, with a low of $76.89 per ounce.

After a brief plunge, silver prices showed remarkable resilience, beginning to recover on cautious buying by traders, turning positive intraday. However, according to the latest Gate data, spot silver is quoted at $79.16 per ounce.

Gold also experienced intense fluctuations, briefly breaking below the $4,500 per ounce support level in early trading. The domestic futures market reacted more violently, with the main Shanghai silver futures contract hitting the limit down, and the main Shanghai gold futures contract falling over 10%.

02 Causes of Volatility

This intense price fluctuation is driven by multiple factors. The immediate trigger is the potential change in the leadership of the Federal Reserve.

On Friday, market rumors circulated that U.S. President Trump plans to nominate Kevin W. as the next Fed Chair. This news rapidly shifted market expectations. Before the announcement, W.'s probability of becoming Fed Chair was only 31.5%, but it quickly surged to 95.5%, eventually exceeding 99%.

Kevin W. is viewed as a more hawkish candidate compared to others. He served as a Fed Board member during the 2008 financial crisis and has since criticized post-crisis monetary policies. Markets expect his nomination could lead to tighter monetary policy, boosting the dollar and pressuring dollar-denominated precious metals.

An increase in margin requirements also added pressure. To control risk, CME Group announced raising margin ratios for gold and silver futures from 6% and 11% to 8% and 15%, respectively. This is the fifth margin hike within just 9 days.

These measures directly increased traders’ holding costs, forcing some leveraged traders to cut positions or add margin.

03 Technical Factors and Market Structure

In addition to fundamentals, several technical factors intensified this market volatility. Before the plunge, the precious metals market was already in an extremely overbought state.

Gold’s Relative Strength Index (RSI) reached 90, the highest in decades. Typically, an RSI above 70 signals overbought conditions, and silver faced similar circumstances.

The “gamma squeeze” phenomenon in market structure also accelerated the decline. When prices break below key strike prices, options traders hedge by selling futures contracts, creating a self-reinforcing downward spiral.

In COMEX gold futures, large options positions are concentrated at key levels such as $5,300, $5,200, and $5,100 per ounce. When prices break below these levels, chain reactions are triggered.

The Chinese market’s special situation also impacted global silver prices. UBS SDIC Silver Futures Fund once traded at a premium of 36% to 64% over Shanghai Futures Exchange contracts.

The Shenzhen Stock Exchange suspended trading of SDIC Silver ETF throughout the day, preventing Chinese investors from selling holdings locally, leading them to sell via global markets such as SPDR Silver Trust ETF and COMEX futures.

04 Industrial Demand and Silver’s Value

Despite short-term volatility, the long-term fundamentals of silver remain worth noting. Unlike gold, mainly a safe-haven asset, silver has significant industrial applications.

Over 60% of silver demand comes from industrial use, primarily in photovoltaics, new energy vehicles, and AI servers.

The photovoltaic industry is a major growth driver for silver demand. In 2025, global silver consumption for solar reached 7,560 tons, accounting for 55% of total silver demand. As N-type cell technologies (TOPCon/HJT) penetrate from 9% in 2022 to over 70% in 2025, the silver consumption per unit increases by 30% to 100% compared to traditional P-type cells.

Single-vehicle silver usage in new energy vehicles ranges from 35 to 50 grams, 2 to 3 times that of traditional fuel vehicles. The AI server sector is growing rapidly, with silver per unit 2 to 3 times that of traditional servers, with demand growth reaching 55% to 65% in 2025.

These structural changes suggest that even if investment demand temporarily cools, industrial applications could provide long-term support for silver prices.

05 Institutional Views and Market Outlook

In the face of such dramatic market swings, major institutional analysts have offered different interpretations. Mark Wilson, head of trading at Goldman Sachs, believes investors should not overinterpret this “position cleansing.”

He points out that despite the volatility, the core drivers pushing the market since the beginning of the year have not fundamentally changed. The immediate cause of this correction is excessive positioning by investors.

Bank of America’s chief investment strategist Michael H. stated in a recent report that, for investors, this means that despite short-term volatility, the macro logic driving gold and physical assets higher remains solid.

His analysis indicates that unless a more destructive “big event” occurs beyond the current macro narrative, this bull market driven by currency depreciation will not end easily. However, he also warns investors to be cautious of potential liquidity de-leveraging risks in the first half of the year.

UBS previously raised its gold target price significantly, lifting the 2026 targets for March, June, and September to $6,200 per ounce, citing stronger-than-expected demand driven by increased investment.

Xu Ying, chief macro strategist at Toho Derivatives Research Institute, said that in the medium to long term, the upward logic for gold prices has not reversed. CICC’s latest research report pointed out that breaking through $5,500 per ounce in London spot gold is a key watershed.

06 How Investors Can Respond

For ordinary investors, risk management in such extreme market environments is especially important. Controlling leverage and position size is key to survival amid sharp fluctuations.

Given CME’s five margin hikes within 9 days, traders should ensure their accounts have sufficient buffer funds to avoid forced liquidations due to margin calls. Monitoring margin ratios and account net worth in real-time on platforms like Gate is crucial.

When trading precious metals on the Gate platform, it is advisable to adopt a phased approach rather than large lump-sum investments. Setting reasonable stop-loss levels can help limit maximum losses per trade. Considering current market volatility, stop-loss ranges may need to be adjusted upward.

Market panic periods are often opportunities in disguise. The growth prospects of silver in industrial applications and the long-term logic of gold as a currency substitute have not changed due to short-term fluctuations.

From an asset allocation perspective, precious metals can serve as tools to hedge against currency depreciation and economic uncertainty, but their proportion should be within an appropriate range in the portfolio.

Future Outlook

Silver prices are still much higher than 12 months ago, and technical indicators show valuations remain elevated. The Shanghai Gold Exchange responded swiftly today, announcing that if silver deferred contracts experience a one-sided market, margin levels will be adjusted from 20% to 26%, and daily price limits from 19% to 25%.

As the market digests the nomination of the new Fed Chair, investor focus will shift back to economic fundamentals. Mid-February economic data and earnings season results will provide clearer market guidance.

The subsequent trend of silver will largely depend on China’s market response. Investors are closely watching the opening performance of the Shanghai market to see whether demand for silver in China can recover after this shock sell-off.