Silver ETFs crash 38% in 7 days. Time to buy for those who missed the rally?

Silver exchange-traded funds (ETFs) have cratered 38% from their all-time peak hit just seven trading sessions ago on January 29 as margin requirement hikes and profit-booking triggered a brutal unwinding of leveraged positions.

The sharp reversal comes after spot silver plummeted below $65 an ounce before staging a dramatic 8.6% recovery to $77.33 on Friday in international markets—a whipsaw that underscores the metal's heightened volatility and the delicate positioning in the market.

The sell-off accelerated after CME Group raised margin requirements for gold and silver futures for a third time in two weeks on Thursday, forcing leveraged traders to unwind positions. The move, designed to curb risks from heightened market volatility, compounded pressure from hawkish Federal Reserve expectations following Kevin Warsh's nomination and a stronger dollar.

"Last week's steep plunge was driven by hawkish Fed expectations after Kevin Warsh's nomination, a stronger dollar, and sharp CME margin hikes that forced leveraged unwinding," said Hareesh V, Head of Commodity Research at Geojit Investments Limited. "Profit-taking after record highs also amplified rapid swings, keeping market sentiment fragile."

Time to buy silver?

Despite the brutal correction, fund managers see potential for long-term investors willing to adopt a systematic approach.

"Yes, at current levels investors can consider taking exposure to silver ETFs with a long-term perspective and through a systematic approach," said Satish Dondapati, Fund Manager at Kotak Mahindra AMC. "Although prices have corrected, short-term volatility in silver is likely to continue. Over the long term, silver's fundamentals remain intact, supported by a supply deficit and strong industrial and investment demand."

However, Dondapati cautioned that position sizing is critical: "Investors should keep in mind that silver is a highly volatile asset and should invest based on their risk appetite, limiting overall allocation to precious metals to around 15–20%. Aggressive investors may take higher exposure within this range, while conservative investors should maintain lower exposure."

Silver's thin market structure has magnified the decline. "Silver has come off mainly because it has run up too fast in a short period," said Akshat Garg, Head of Research & Product at Choice Wealth. "Over the past year, prices had moved sharply higher and a lot of optimistic positioning had already been built in. When markets are stretched like that, even small changes in global cues can trigger a correction."

He added: "Silver, by nature, reacts more sharply than gold. It is a smaller and thinner market, so when selling starts, the fall looks steeper. Silver ETFs feel the impact immediately because they track spot prices closely."

Despite the brutal correction, technical indicators suggest potential stabilization. Silver is now trading within the $71-$80 demand zone, with a hammer formation near $64 aligning with the long-term 100-day exponential moving average—reinforcing structural support after correcting from highs above $120.

SIP or lumpsum?

Wealth managers are counseling a disciplined approach over knee-jerk reactions.

"There's no need for panic. Silver is a volatile asset and sharp ups and downs are part of the journey," Garg said. "One correction does not change the long-term relevance of silver, but it does remind investors why position sizing matters."

He cautioned against lump-sum investing at current levels: "Investors should avoid chasing prices or reacting to day-to-day moves. Silver works best as a small, supporting allocation in a portfolio, not as a core holding. If someone wants exposure, staggered buying is a far more sensible approach than lump-sum investing, especially in a volatile phase like this."

Hareesh echoed the gradual approach: "Bullion investors should stay patient and avoid reacting to short-term volatility triggered by margin hikes, profit-taking and policy uncertainty. Gradual, staggered accumulation can help manage timing risks as long-term fundamentals like geopolitical tensions, central-bank demand and currency pressures remain supportive."

He added that monitoring the dollar and upcoming Fed signals is crucial, while keeping positions balanced to navigate heightened volatility.

For short-term traders, rigorous risk management is essential. "For long-term investors, this phase is about patience and discipline rather than action," Garg said. "The current fall is driven more by market positioning and global macro adjustments, not by a breakdown in the silver story."

Silver's dual monetary and industrial role continues to support a constructive long-term outlook. A decisive move above $80-$85 would significantly strengthen recovery prospects toward $100-$105, suggesting the recent carnage may present opportunities for those who missed the initial rally, provided they have the stomach for continued turbulence.