Silver Prices Soar After Surprise Treasury Announcement

The silver market experienced a sudden reversal on September 9 after the US Treasury announced it would raise the maximum size of its buyback operations from $2 billion to at least $4 billion, targeting the 10- to 30-year sectors. This move sent the 30-year yield plummeting by roughly 8 to 10 basis points and caused the dollar index to drop about 0.7% to 0.8%. The Treasury's announcement came as a surprise to market participants, who had been positioning for higher long yields and a firm dollar.

The silver price had been under pressure all week, with Tuesday's selloff taking it below $64. However, the sudden reversal on September 9 erased both the Monday and Tuesday losses in a single afternoon session. The speed of the turn suggests that the market was overcrowded on the short side heading into the announcement.

The silver price bounced back to retest its recent lows, with the session low at $62.56 coming within reach of the 50-day moving average at $61.31 and the 50% level of the all-time high at $60.83. Both levels held firm as aggressive buying turned the market around.