Silver Faces Downside Risk as Strategist Flags Extreme Valuation Warning

Silver prices plunged over 31% in a single session on Jan. 30, 2026, marking its worst daily drop since 1980. The sell-off was driven by liquidity crunches and forced liquidations after President Donald Trump's nomination of Kevin Warsh as the next Federal Reserve Chair triggered a sharp rise in Treasury yields and the U.S. dollar. Prices had peaked above $120 just 24 hours earlier but stabilized near the $78–$80 range.

Bloomberg Intelligence senior commodity strategist Mike McGlone has warned that the current valuation of silver remains extremely stretched. He emphasized that silver's price strength is masking underlying risk, and the metal could still face a sharp reversion even after the recent pullback. McGlone cited the silver-to-copper ratio as a key indicator of overvaluation, noting that the ratio is still in the mid-teens, well above the long-term average.

The silver-to-copper ratio, a commonly used benchmark for relative metal valuations, has remained elevated despite the recent volatility. The ratio approached nearly 19 pounds of copper per ounce of silver earlier in the year, and even after declining, it remains above historical peak levels. A reference level near 10 has marked peaks in this ratio since 1988, highlighting the current imbalance.

Why Is the Silver-to-Copper Ratio Important?

The silver-to-copper ratio is a key tool for analyzing the relative value of silver in the context of broader industrial and investment markets. Copper, as a globally consumed industrial metal, provides a more stable pricing anchor compared to silver, which is often driven by speculative and momentum-driven flows.

Copper's pricing is influenced by demand in manufacturing, infrastructure, and electrification, which tend to follow more predictable cycles. In contrast, silver's pricing is heavily influenced by investor sentiment, especially during periods of monetary uncertainty or speculation. This divergence can create valuation extremes that eventually correct, often in sharp fashion.

The 100-week correlation between silver and copper stands at about 0.51, signaling a meaningful but not perfectly synchronized relationship. During speculative phases, silver can outperform copper significantly, widening the ratio before a reversion occurs.

What Does a $60 Price Level Mean for Silver?

Even if silver drops to $60 an ounce, the ratio to copper could still remain elevated, suggesting that a price of $60 would represent normalization rather than a full correction. McGlone's analysis suggests that a reversion to this level could still be considered relatively expensive compared to copper's steady pricing profile.

This scenario underscores the long-term structural forces at play. Copper's role as a foundational industrial commodity provides a stable benchmark, while silver's volatility reflects its dual role in investment and industrial markets. The strategist also noted that silver's recent surge above $100 had pushed the metal into historically extreme territory, similar to late 1979 and early 1980. Those periods ended with a prolonged decline, eventually driving prices down to about $3.56 by 1993.

What Are Analysts Watching for Signs of Further Declines?

Commodities analyst Jeffrey Christian from CPM Group has warned that the drop to $68 an ounce could mark a worst-case scenario, representing an additional 17% decline from current levels. He is closely monitoring several indicators, including signs of diminishing investor interest, increasing inventories, and shifts in trading momentum in silver-related ETFs and bonds.

Christian's analysis reinforces the view that the recent plunge is a significant event for the commodities market. The market's behavior is being driven by a combination of speculative trading, investor sentiment, and macroeconomic factors such as inflation and the U.S. dollar's strength.

The recent price movements also highlight the influence of policy decisions on precious metal markets. The nomination of Kevin Warsh as Fed Chair has introduced a high degree of uncertainty, with investors now assessing how the new leadership might affect monetary policy, inflation expectations, and interest rate trends.

The broader implications of the Fed's decisions will likely shape silver's path forward. A tighter monetary policy could further weigh on silver prices, especially if it leads to higher real interest rates.

The situation remains fluid, and investors are being advised to monitor both technical and fundamental indicators for signs of further price adjustments. The key takeaway for the market is that while silver has seen a dramatic correction, it may still face a period of consolidation and potential further downside volatility.