Market News

(Bloomberg) -- Silver lurched between losses and gains, dropping nearly 10% before snapping back, as a lack of liquidity led to wild swings in a market struggling to find a floor.

Spot silver was up nearly 10% to almost $78 an ounce by late afternoon in New York on Friday, having earlier tumbled toward $64. That followed a 20% decline in the previous session that wiped out all of the metal’s gains from a spectacular rally last month. Gold also advanced after an earlier retreat.

Silver has always been subject to more violent price swings than gold, due to its smaller market and lower liquidity. But recent moves, the most volatile since 1980, have stood out for their scale and speed, amplified by speculative momentum and thinner over-the-counter trading. The white metal has lost more than a third since hitting an all-time peak on Jan. 29.

“When volatility rises, market makers naturally widen spreads and reduce balance-sheet usage, leaving liquidity weakest precisely when it is needed most,” Ole Hansen, head of commodity strategy at Saxo Bank AS, said in a note. Until a degree of order returns, “volatility risks feeding on itself.”

A multiyear bull run for precious metals accelerated last month, in a surge underpinned by heightened geopolitical risks, concerns about the Federal Reserve’s independence and speculative buying in China.