Last night's precious metals crash: after silver surged 6% in a single day to hit a historic high and then plummeted 10%, gold followed suit, and the entire precious metals sector was wiped out. How should we view the market outlook?

Yesterday (December 29), the precious metals market staged an extreme rollercoaster ride, especially silver, which fell from heaven to hell—definitely a Black Monday.

Silver was the worst hit in this crash: intraday, it surged 6% to reach a historic high, seemingly poised to continue higher, but then suddenly entered free fall, with the daily decline reaching 10%. From the day's peak, about 15% of its market value evaporated in a short period. The rapid rise was matched by an equally fierce fall.

The entire precious metals sector also suffered: gold dropped over 4%, platinum futures fell more than 14%, and palladium plunged over 16%. The four major precious metals all experienced a collective wipeout, effectively a full-line collapse. Even the precious metals mining stocks on the US stock market were not spared, with the sector plunging and crying out in distress.

This cliff-like collapse was caused by multiple risk factors converging, not a single reason. In simple terms, it was the inevitable correction after an overheated rally. The specific reasons are quite understandable:

First and foremost: the foundation of this rally was too fragile, driven purely by speculative capital. The more aggressive the rise, the sharper the correction. This year, the gains in precious metals were already extraordinary—silver's year-to-date increase approached 150%, and gold rose over 70%, both reaching multi-year high levels. Such short-term frantic surges had accumulated enormous profit-taking positions, with many funds ready to exit. Moreover, UBS explicitly stated that this price increase was not driven by genuine demand but by "market liquidity shortages"—simply put, the market lacked sufficient funds to support large moves. The market was very "light," and once big players started taking profits or a minor negative event occurred, prices collapsed instantly, like a blown soap bubble—looking shiny but bursting at the slightest touch.

Second: the short-term rebound of the US dollar became a trigger for the price collapse. The dollar and precious metals have always been inversely related. When the dollar strengthens, gold and silver priced in USD become more expensive for investors holding other currencies, reducing demand. With demand weakening, prices cannot hold. Already high, precious metals were hit hard by the dollar's rebound, accelerating their decline.

Third: the previous speculative frenzy had already accumulated significant risks. Some institutions had warned that silver's rally was entering a "mania" stage, clearly driven by short covering. Such markets are characterized by extreme volatility and sharp swings—appearing attractive but highly risky. Market signals had already warned: the gold-silver ratio was low, and the panic index remained high, all indicating that silver was overbought, and a sharp correction was inevitable.

Fourth: the failure of industrial demand expectations removed a key support. Silver differs from gold in that it has strong industrial attributes—solar industry, for example, is a major demand driver. The market had been hyping a surge in industrial demand, pushing silver prices higher. But the reality was that actual industrial demand did not meet expectations; once financial speculation cooled, industrial demand couldn't sustain such high prices, leading to larger declines.

After analyzing the reasons for the crash, the most pressing concern is: how will this crash affect the A-share precious metals sector today?

The answer is clear: the A-share precious metals sector is likely to open lower or even plunge, with little suspense.

On one hand, this is due to the direct transmission of sentiment. The global precious metals market is interconnected. The collective plunge in international gold, silver, platinum, and palladium prices will inevitably drag down related A-share stocks in gold and silver mining and smelting, even if they performed well yesterday. Overnight international market moves can completely reverse market sentiment.

On the other hand, profit expectations will adjust. While stock prices of precious metals companies do not always move directly with metal prices, their core earnings depend heavily on metal prices. A sharp decline in prices will lead the market to lower future earnings estimates and valuations for these companies, especially those with high costs and high sensitivity to metal prices. Their stock prices will fall more noticeably. Additionally, A-share precious metals stocks have already risen significantly this year along with international markets, and profit-taking positions may also exit on this negative wave, adding pressure from both inside and outside.

Finally, and most importantly: what is the future outlook for precious metals? How should ordinary investors respond? The key lies in these four critical signals—keeping an eye on them is enough:

✅ First, observe "liquidity support." This is the most crucial factor. The core issue behind this crash is insufficient liquidity. Whether the market can stabilize depends on whether enough buy orders come in to absorb profit-taking. If the market remains short of funds and the market remains "light," the subsequent trend will continue to be volatile, with large swings. If sustained buying enters and prices gradually stabilize, the risk of a further crash will be gradually alleviated.

✅ Second, watch "market sentiment"—has the frenzy completely subsided? Previously, there was a nationwide greed-driven chase. After the crash, will sentiment turn to panic or even despair? If panic spreads, another wave of selling is likely, and prices will continue to fall. If sentiment gradually calms and becomes less extreme, there is a chance for stabilization. Pay attention to the volatility index (VIX) and trading volume; if volume and price move together steadily, sentiment will stabilize.

✅ Third, keep an eye on "the dollar's trend." If the dollar continues to strengthen, precious metals will remain under pressure, making a rebound difficult. But if the dollar only rebounds temporarily and then weakens again, precious metals can find support and likely recover some of their losses. The strength or weakness of the dollar directly determines the short-term rhythm of precious metals.

✅ Fourth, monitor "technical support levels." After a sharp decline, prices tend to find support levels to stabilize. Whether silver can hold around $70 and whether gold can defend key psychological levels are particularly important. If prices stabilize at support levels without making new lows, it signals a potential bottom; if support levels are broken, further declines are likely.

In summary: this crash in precious metals is not an accidental sudden negative event but a natural correction after overbought conditions and risk accumulation—an "normal adjustment after excessive gains." In the short term, precious metals are likely to experience continued volatility, with high fluctuations. Ordinary investors should avoid rushing to buy the dip or being tempted by short-term rebounds. The safest approach now is to observe more and act less, waiting for the market to stabilize and signals to clarify before considering entry. For those holding positions, risk management is essential—avoid holding on with a wishful mindset to prevent being trapped by extreme volatility.

The long-term logic of precious metals remains unchanged; only the short-term speculative bubble has been burst. Once the market calms down and prices return to rational levels, high-quality precious metal assets still have room for recovery. But this process requires patience.