Silver has always been a volatile precious metal, but a nearly 9% decline in a single trading day is enough to get the attention of investors, bullion dealers, refiners, and anyone carrying physical metal inventory.

At the IPMI’s 50th Annual Conference, Ed and Rich sat down with Peter Grant, Vice President and Senior Metals Strategist at Zaner Metals, to discuss what is driving the latest precious-metals volatility, why more dealers are turning to hedging, and what could happen next for silver and gold.

Why a 9% Silver Drop Matters

A 9% move might not sound catastrophic when looking at a long-term chart, but for businesses operating on thin precious-metals margins, a move of that size can dramatically alter a balance sheet.

Bullion dealers regularly buy physical metal from customers and hold it in inventory until it is resold.

If silver drops sharply while that inventory is sitting on the shelf, the value of the dealer’s position can fall significantly before the metal is sold.

That’s exactly why hedging becomes important.

Peter explains that volatility has pushed more coin dealers and precious-metal businesses to reconsider the old strategy of simply holding inventory and assuming the gains and losses will eventually balance out.

The Precious Metals Business Operates on Thin Margins

Precious-metals dealers typically aren’t making enormous margins on every transaction.

They make money by consistently buying and selling metal while managing the price risk between those transactions.

That creates a problem during periods of extreme volatility.

Imagine purchasing 100 ounces of silver from a customer and holding it overnight.

If silver falls several percent before you resell it, the market move can easily eliminate the margin you expected to make on the transaction.

A nearly 9% decline can do considerably more damage.

What Is Hedging?

Hedging allows a dealer, refiner, processor, or other metals business to offset the price exposure created by holding physical metal.

For example, if a dealer purchases 100 ounces of physical silver from a customer, the dealer could establish an offsetting hedge.

If silver prices decline, the loss in the physical inventory position can potentially be offset by the hedge.

When part of that inventory is sold, the corresponding portion of the hedge can be removed.

Peter explains that Zaner Metals can hedge quantities down to individual ounces rather than requiring businesses to trade only large standardized futures contracts.

That can make hedging practical even for smaller bullion and coin dealers.

Why More Dealers Are Hedging Now

For years, some smaller precious-metal businesses operated without formal hedging programs.

Their philosophy was relatively simple:

Sometimes they bought metal before prices rose.

Sometimes they bought before prices fell.

Over a long enough period, they believed those differences would balance out.

That approach becomes much harder to maintain when volatility dramatically increases.

During periods when silver is moving several percentage points in a single day, an unhedged inventory position becomes considerably more dangerous.

That has encouraged more dealers to begin thinking about price risk as something that needs to be actively managed.

Lessons From the 1980 Silver Market

Extreme silver volatility isn’t new.

Ed recalls operating a coin business during the 1980 silver market, when customers lined up to sell physical silver as prices surged.

Dealers were buying large quantities of metal from the public while simultaneously trying to move that inventory back into the wholesale market.

The problem was that any metal held overnight remained exposed to price changes.

Without a hedge, a sudden decline could significantly change the value of the business’s inventory before the next trading day.

That experience demonstrates why physical inventory and market-price risk have to be considered together.

Hedging Isn’t Only for Large Refiners

Large refiners and precious-metal processors have long used hedging as a normal part of their operations.

But the strategy isn’t limited to massive companies.

Zaner Metals works with a broad range of businesses including:

• Coin and bullion dealers
• Precious-metal refiners
• Mints
• Smaller independent shops
• Large authorized dealers

The underlying principle is the same regardless of business size: if you’re holding metal while the price is moving, you’re exposed to market risk.

Why Technology Matters in Precious Metals Trading

Modern precious-metal businesses aren’t simply buying and selling metal across a counter anymore.

Many dealers now sell simultaneously through websites, marketplaces, retail locations, and other channels.

That creates another challenge.

Precious-metal pricing changes constantly.

If a dealer lists silver or gold at a fixed price online while the underlying metal market is moving quickly, margins can disappear before the listing is manually updated.

Zaner Metals has developed technology that can integrate live pricing with different e-commerce systems.

That allows dealers to automatically adjust prices based on movements in the underlying metals markets.

Automating Precious Metal Pricing

Peter explains that Zaner works with platforms such as WooCommerce, Magento, and online marketplaces.

Through pricing integrations and APIs, dealers can potentially update prices automatically across multiple sales channels.

That is especially useful during volatile markets.

Historically, some dealers selling through platforms such as eBay had to manually update product prices as gold or silver moved.

That creates obvious risk.

If silver falls sharply and the online selling price isn’t updated quickly enough, a dealer may sell inventory at an unintended margin.

If silver rises rapidly and prices aren’t adjusted upward, the same problem can occur.

Automated pricing helps reduce that exposure.

What Is Driving Precious Metals Right Now?

Peter describes the current environment as unusual because precious metals are being influenced by several forces simultaneously.

Normally, geopolitical instability tends to support gold because investors often treat it as a safe-haven asset.

But other economic consequences of geopolitical instability can work against precious metals.

One major example is oil prices.

Escalation in the Middle East can push oil prices higher.

Higher energy prices can contribute to inflation.

And persistent inflation can influence Federal Reserve policy.

Why Federal Reserve Policy Matters

If inflation remains elevated, the Federal Reserve may be less willing to cut interest rates.

Markets may even begin considering the possibility of future rate increases.

That matters to gold and silver.

Precious metals do not produce interest or yield.

When interest rates and Treasury yields rise, interest-bearing assets can become relatively more attractive.

A stronger U.S. dollar can also put pressure on metals prices.

So even though geopolitical uncertainty can increase safe-haven demand, higher oil prices and inflation expectations can simultaneously push yields and the dollar higher.

Those forces can pull precious-metal prices in opposite directions.

Could Silver Fall Further?

At the time of the interview, Peter believed precious metals could remain under pressure through the early summer.

Historically, early summer can sometimes be a seasonally weaker period for gold and silver.

He noted that prices had already reached multi-month lows and that new lows for the year were possible depending on several factors.

One of the biggest variables is geopolitical escalation or de-escalation.

If tensions ease, some of the safe-haven support for precious metals could fade.

If tensions increase, the market reaction becomes more complicated because investors also have to consider oil prices, inflation, interest rates, and the dollar.

The Silver Market Is Extremely Volatile

Silver has a unique position in the precious-metals market.

It is both an investment metal and an industrial commodity.

That means it can react simultaneously to:

• Investor sentiment
• Interest rates
• Inflation expectations
• Industrial demand
• Economic growth
• Currency movements
• Geopolitical events

Those competing forces help explain why silver often experiences larger percentage moves than gold.

When the market moves quickly, businesses holding physical silver inventory can experience significant swings in value.

Why Risk Management Matters More During Volatile Markets

A metals business cannot control the price of silver.

It can control how much exposure it carries.

That’s the fundamental purpose of hedging.

For refiners, bullion dealers, and precious-metal processors, the objective isn’t necessarily to predict whether silver will rise or fall tomorrow.

The objective is to reduce the impact of that movement on the underlying business.

A dealer might make money from the spread between buying and selling physical metal.

A refiner might make money from processing fees.

A processor might make money from recovery margins.

Those companies generally don’t need to become silver speculators at the same time.

You Don’t Have to Predict the Market

One of the biggest misconceptions surrounding hedging is that businesses need to know where the market is headed.

They don’t.

In fact, hedging exists partly because nobody knows exactly what the market will do next.

Silver could rebound sharply.

It could fall further.

Geopolitical events could escalate.

Inflation could remain elevated.

Interest rates could change.

The dollar could strengthen or weaken.

Instead of building a business model around correctly predicting those variables, hedging allows companies to focus on their actual operations.

What Happens Next for Silver?

There is no guaranteed answer.

The silver market remains highly sensitive to monetary policy, geopolitical events, inflation expectations, investor demand, and industrial conditions.

A nearly 9% decline in a single day demonstrates just how quickly conditions can change.

The important takeaway for precious-metal businesses isn’t necessarily whether silver rebounds tomorrow or falls another 10%.

It’s understanding how exposed your business is if either scenario happens.

The Bottom Line

Silver’s sharp decline is another reminder that precious-metal markets can move much faster than physical businesses can react.

For investors, that volatility creates both risk and opportunity.

For dealers, refiners, processors, and other businesses carrying physical inventory, it creates a different challenge entirely.

Their goal isn’t necessarily to predict the next move.

Their goal is to protect margins, maintain liquidity, and keep the business operating regardless of what silver does tomorrow.

As Peter explains, hedging turns market volatility from something that can potentially threaten the business into a risk that can be actively managed.

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