Silver traded near $76.60 during Asian hours on Friday, after falling more than 11% late Thursday. The drop came as stocks shifted into risk-off mode and silver slid in a fast sell-off, likely driven by algorithmic trading. The decline followed weakness in technology shares and market moves linked to worries about Artificial Intelligence. Margin calls were also mentioned as a factor that may have added to losses in precious metals.

Fed Expectations And Rates Outlook

Markets now expect the Federal Reserve to keep interest rates higher for longer after strong US jobs data. Higher rates can pressure non-yielding assets like silver. Markets price in about a 92% chance of no change at the next meeting. The chance of a cut by June is close to 50%, based on the CME FedWatch tool. The Silver Institute said on Tuesday that global silver demand is expected to be steady in 2026. It also said that gains in retail investment should offset most declines in industrial, jewellery, and silverware demand. Traders are watching the US CPI report due later on Friday for clues. Headline and core CPI are expected to be 2.5% year on year in January. Silver is now trying to stabilize around $76.60 after the sudden 11% plunge. The move appears to have been driven by algorithmic selling during the risk-off slide in technology stocks. The CBOE Volatility Index (VIX), a key gauge of market fear, jumped above 22 yesterday. That suggests broader market stress, not just a silver-specific move. Higher implied volatility also makes option premiums more expensive and signals that traders expect large price swings.

Cpi Scenarios And Trading Positioning

Attention now turns to the US Consumer Price Index (CPI) report due later today. If inflation comes in above the 2.5% forecast—similar to upside surprises seen in late 2025—it would reinforce the Federal Reserve’s “higher for longer” stance. That outcome would likely pressure silver again, since it does not pay interest. For derivatives traders, this setup may favor buying put options to hedge against another drop, especially ahead of the CPI release. The recent 11% move shows how fast prices can fall, so downside protection matters. If inflation surprises on the soft side, short-dated call options can offer a leveraged way to trade a rebound from oversold levels. This kind of sharp move echoes the flash crash seen in August 2021 and highlights how quickly liquidity can dry up. Because volatility is high, long straddles or strangles may make sense in the coming weeks. These strategies aim to profit from a large move in either direction, without needing to predict the Fed’s next step. Beyond the near-term macro headlines, fundamentals may offer support. The Silver Institute recently pointed to weaker jewellery demand. Even so, industrial demand from solar and electric vehicle production remains strong, reaching a record 215 million ounces in 2025. That underlying demand could help create a price floor once the current wave of speculative selling fades. Create your live VT Markets account and start trading now.

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