SILVER - What Happened and Why Did It Dump So HardTLDR; Because it Ran so Hard.
In a recent Silver Minds post @mojo42391138 asked "what happened to the circuit breakers?" which got me thinking about whether Silver did indeed have mechanisms to try and halt trading in a similar way to stocks when things started to get out of control. So I went off and asked Dr Google.
Below is the result of some searches I did and some of my own thoughts so don't take it as any clever insights on my part. I just thought it was interesting so thought Id share it.
Yesterday was indeed a historic bloodbath for the precious metals market with both silver and gold both dumping. While gold fell significantly, silver lived up to its reputation as "gold on steroids" , plummeting roughly up to 30% (depending on the exchange and contract) after hitting record highs near $120 earlier in the week.
The answer to my question in terms of why did it dump so hard and what happened to the circuit breaker (if any) was yes it does have them, but they function differently than the ones you see on the New York Stock Exchange.
1. Why it felt like there were no breakers
In the stock market (like the S&P 500), a 7% drop of the whole market triggers a mandatory 15-minute "time-out" for the entire market. In the silver market (specifically the COMEX/CME Group), they use Dynamic Circuit Breakers.
How these work: Instead of stopping the whole market for a 7% drop, these breakers look at a rolling 60-minute window . If the price moves +/- 10% within that hour, trading pauses for just 2 minutes to allow liquidity to reset. Nothing! (IMO).
The Result: Because the pauses are so short, the price can continue to "cascade" downward after each brief restart. Yesterday’s move was driven by a "perfect storm" of the dollar strengthening and massive profit-taking, which often happens too fast for a 2-minute pause to stop the bleeding.
2. Why Commodities are treated differently than Stocks
Regulators generally allow commodities to move more freely than stocks for a few reasons:
Global Nature: Unlike Apple or Tesla stock, which primarily trades in the US, silver trades 24/7 in London, Shanghai, and New York. If one exchange (like the COMEX) shuts down for an hour, trading just shifts to another global hub, which can lead to "price gaps" and more chaos when the first exchange reopens.
Price Discovery: Commodities are used by industrial manufacturers (solar, electronics). These buyers need to know the real price to hedge their costs. Artificially freezing the price can prevent people from actually getting the metal they need.
Price Limits vs. Halts: Many commodity exchanges prefer "Price Limits" over halts. For example, some silver contracts have a 10% limit. Once hit, you can still trade, but nobody is allowed to bid lower than that limit for the rest of the day, unless the exchange decides to expand the limits (which they often do during "limit-down" events).
3. What triggered yesterday's "Reality Check"?
The collapse wasn't just random; it was a collision of technical and fundamental factors:
The "Warsh Effect": News of Kevin Warsh being nominated for Fed Chair signaled a "hawkish" shift (higher interest rates), which is kryptonite for silver.
Technical Gravity: Silver had gained over 50% in January alone. It was "overbought" by almost every mathematical standard, making it ripe for a "liquidity flush."
So that all makes sense - especially the globally traded silver not being able to be taken offline, but SLV which a heap of us hold is an ETF traded on the exchange, so I also thought it would be interesting to see how the silver ETFs (eg our SLV) handled the drop compared to the physical metal and why they didn't halt or get a time out.
Again, it turns out that while both crashed, they did so in different ways and under different rules.
Here is how the major silver ETF, SLV, handled the drop compared to the physical market.
1. Did SLV have circuit breakers?
Yes, but they are "Stock Market" breakers. Because SLV trades on the NYSE Arca (an equity exchange), it is subject to the standard Limit Up-Limit Down (LULD) rules of the stock market.
The Mechanism: If the price of SLV moves 5% or 10% within a 5-minute period, the stock exchange pauses trading for 5 minutes.
The Reality: Yesterday, while the physical silver price in London and the COMEX futures were "cascading" with only 2-minute pauses, SLV was hitting these 5-minute equity halts repeatedly. This meant that for several stretches of the morning, you couldn't sell your SLV even as the spot price of silver was continuing to fall.
2. SLV Performance vs. Physical Silver
A major issue yesterday was the tracking error. During extreme crashes, ETFs often "disconnect" from the metal they are supposed to represent.
While physical spot silver saw a violent intraday drop of 13% to 18%, SLV shareholders faced much steeper reported losses ranging from 28% to 40% driven by a wave of panic-selling and forced liquidations on the NYSE.
This discrepancy was exacerbated by liquidity mismatches: while physical silver trades on a global 24/7 basis, SLV was tethered to stock market hours and hit by repeated five-minute LULD (Limit Up-Limit Down) halts that locked investors in while the underlying price continued to crater.
Consequently, while physical coins maintained a "safety premium" of 10% or more at dealers, the paper trust plummeted to a significant discount, proving that in a true silver bloodbath, the "paper game" can't always keep pace with the bars in the vault.
The "Panic Discount": At the height of the crash, SLV shares were actually selling for less than the value of the silver held in the vault. This happens because "paper" investors (who can sell with a click) panic faster than physical bullion holders.
3. The "Paper Trap" Risk
Yesterday also highlighted a growing concern for 2026: Physical Backing. There were reports that the massive volume in SLV was putting pressure on the trust to prove it actually had enough silver in the vaults to cover the new shares. This "counterparty risk" often causes ETFs to drop harder than the metal itself during a crisis.
So - that was all a bunch of stuff I personally didn't know before. That whole disconnect between paper silver and physical silver and the difference in how they get halted created a mess :)
Trick is whether now that it is at such a deep discount and you can see its back pretty close to that more realistic 20 day support, and that wick didn't get through the 50 day, maybe now is a good time to buy if you FOMO'd before...
Who knows, who knows...
