Silver Retreats Slightly, Is the Rally Nearing a Peak?
Silver prices corrected after hitting a new record high. In Asian trading (Singapore), silver fell as much as 2.4% to around $57.09 per ounce, before settling around $57.43. Despite the correction, the price remains less than $2 from its previous record of $58.97. This correction occurred due to profit-taking by traders following the sharp rally in recent days, as well as a slight strengthening of the US dollar index of around 0.1%, making the precious metal slightly more expensive for non-dollar buyers.
In terms of the broader trend, silver is actually still in a very strong upward phase. This year, silver prices have nearly doubled, outperforming gold's "recent" rise of around 60%. Both have the potential to record their best annual performance since 1979. This extreme rise was driven by speculation about tight supply and expectations of lower interest rates in the US, which is a boost for the non-interest-bearing precious metal. Supply pressures intensified after the historic "silver squeeze" in October, which triggered a massive influx of silver into London and tightened markets elsewhere. Inventories tied to warehouses at the Shanghai Futures Exchange even fell to their lowest level in a decade.
On the macro front, delayed US economic data has reinforced bullish sentiment for silver. The ADP report showed that US companies cut their workforce in November by the largest amount since early 2023, adding to concerns about a weakening labor market. This has made market participants almost certain that the Fed will cut interest rates by 25 basis points at its December 9-10 meeting, with the probability considered "almost certain" by the swaps market. Lower interest rates lower the opportunity cost of holding precious metals, thus supporting demand for both silver and gold.
There are also policy factors adding spice to price movements. Silver was recently added to the list of critical minerals by the US Geological Survey, fueling speculation about possible tariffs or an "American premium" on silver. These expectations have driven a large influx of silver into Comex warehouses and tightened liquidity in global markets as market participants await clarity on US tariff policy. In this environment of thin liquidity, inflows into silver ETF options—many led by retail investors—have had a significant impact on prices. Call and put option volumes in popular silver ETFs have even risen to levels last seen during the October squeeze, creating a market structure prone to a blow-off top, or a momentary peak in euphoria.
For the next year, the silver market has the potential to remain highly volatile. On the one hand, if the Fed does indeed enter a rate-cutting phase and the economy doesn't fall into a deep recession, the combination of lower interest rates, the "critical metals" narrative, and tight supply could keep silver attractive and hold prices high, though perhaps not as aggressively as this year's gains. On the other hand, if the US economy hits too hard, industrial demand could weaken and limit upside. With prices already soaring and substantial speculative activity in ETFs, the risk of a sharp correction remains, especially if rate cut expectations reverse or US tariff policy is less stringent than the market currently envisions. In short: silver's long-term trend remains constructive, but a "straight up" phase like this year's is difficult to repeat without major volatility along the way. (asd)
Source: Newsmaker.id
