To The Moon

Last Friday night, gold $黄金主连 2604(GCmain)$ and silve $白银主连 2603(SImain)$ r posted their largest single-day declines in history. Silver plunged as much as 35% in one day, nearly erasing all of its gains for the year in a single blow.

Such extreme volatility far exceeded most investors’ expectations. However, readers who have been following my analysis should recall that I long ago characterized this silver rally as a “short squeeze”—a phenomenon not uncommon in futures markets (typically erupting in some commodity every 2–3 years). Since short squeezes are driven more by market positioning and sentiment than by fundamental supply-demand dynamics, they tend to unwind just as violently as they surge. This recent precious metals crash offers a textbook example.

Over the weekend, market commentary largely blamed the plunge on the nomination of Kevin Warsh, former Fed governor, as the next Federal Reserve Chair. Warsh was considered one of the least expected choices among the five leading candidates—and notably the most hawkish of the group. His nomination appeared to contradict Trump’s repeated calls for aggressive rate cuts, catching markets off guard. $黄金主连 2604(GCmain)$ $微黄金主连 2604(MGCmain)$ $1盎司黄金主连 2604(1OZmain)$

Yet this move also signals something important: Trump is not intent on destroying the Fed’s independence. Warsh is a familiar face within Fed circles, has extensive experience engaging with financial institutions, and is widely respected by markets. In fact, during Trump’s previous term, Warsh was one of the final two contenders (alongside Powell) for the Fed chair role—demonstrating Trump’s strong confidence in his capabilities.

More crucially, Warsh’s appointment does not necessarily rule out rate cuts. On the contrary, a policy mix of aggressive rate cuts combined with rapid balance sheet runoff (“quantitative tightening”) could theoretically lower borrowing costs without reigniting inflation—a precise fit for Trump’s policy dilemma. (Whether this approach risks destabilizing markets remains unclear, but “rate cuts without inflation” is exactly what Trump wants.) $白银主连 2603(SImain)$ $迷你白银主连 2603(QImain)$ $白银2603(SI2603)$ $2倍做多白银ETF-ProShares(AGQ)$

Thus, Warsh’s nomination shifted market focus from euphoric expectations of dovish easing to growing fears of accelerated quantitative tightening—which neatly explains the sharp sell-off in gold and silver.

Implications for the Gold and Silver Outlook

Last Friday night, silver plunged sharply below its 10-day moving average—a level I’ve repeatedly emphasized as the key profit-taking and stop-loss line during a short squeeze. Once this critical support is broken, even if prices eventually recover, it will likely take several months of consolidation to rebuild bullish momentum.

Therefore, for investors with low cost bases who intend to hold precious metals long-term: it’s far safer to stick with gold rather than speculate on silver at this stage.

For short-term traders: $白银主连 2603(SImain)$ $迷你白银主连 2603(QImain)$ $白银2603(SI2603)$

• The 10-day moving average, once a support, now acts as resistance.

• Any near-term bounce will likely face strong selling pressure around this level.

• Moreover, if Warsh makes any hawkish comments about accelerating balance sheet runoff (quantitative tightening), the downtrend in precious metals may not only continue but even accelerate further. $黄金主连 2604(GCmain)$ $微黄金主连 2604(MGCmain)$ $1盎司黄金主连 2604(1OZmain)$

Do not underestimate the destructive power of “longs liquidating longs” after a short squeeze unwinds. The selling cascade could very well set new historical records on the downside. Stay cautious and prioritize risk management. $白银主连 2603(SImain)$ $迷你白银主连 2603(QImain)$ $白银2603(SI2603)$