Silver Pulls Back From Record After Historic Rally Above $80
Silver retreated sharply after smashing through $80 an ounce for the first time, with traders taking profits from a record-breaking rally powered by a structural imbalance in supply and demand.
The white metal fell more than 5% as it took a roller-coaster ride on Monday, after earlier hitting an all-time peak of $84 an ounce. In between, it whipsawed either side of the previous session’s close. A weaker dollar and rising geopolitical tensions have added to the appeal of precious metals during an end-of-year bull run that also swept gold, platinum and palladium to record highs last week.
Monday’s wild swings came after a comment by Elon Musk over the weekend that highlighted the growing investor frenzy around precious metals. Musk replied to a tweet on Chinese export restrictions by saying on X: “This is not good. Silver is needed in many industrial processes.”
The Chinese measures are effectively a rollover of previous policies and were first announced by the Ministry of Commerce on Oct. 30. Though China ranks among the top three global producers of silver — largely as a byproduct of industrial metals — it is also the world’s largest consumer, and therefore not a major exporter.
“The speculative atmosphere is very strong,” said Wang Yanqing, an analyst with China Futures Ltd., adding that any discussion on moves by Beijing to tighten exports was groundless. “There’s hype around tight spot supply, and it’s a bit extreme now.”
Some exchanges are moving to rein in risk. The margins for some Comex silver futures contracts will be raised from Monday, according to a statement from CME Group Inc — a move that Wang said would help reduce speculation.
Silver’s acceleration — at its peak, it was tracking for its best annual performance in records since 1951 — caps a yearlong rally for precious metals. The gains have been driven by elevated central-bank purchases, inflows to exchange-traded funds and three successive rate cuts by the US Federal Reserve. Lower borrowing costs are a tailwind for the commodities, which don’t pay interest, and traders are betting on more rate cuts in 2026.
“Make no mistake: we are witnessing a generational bubble playing out in silver,” said Tony Sycamore, a market analyst at IG Australia. “With new mines taking up to 10 years to develop and capital being drawn into the precious metals bubble like a moth to a flame, it is impossible to say when the air might come out.”
In the last week, frictions in Venezuela — where the US has blockaded oil tankers — and strikes by Washington on Islamic State in Nigeria have also added to the haven appeal of precious metals. The Bloomberg Dollar Spot Index, a key gauge of the US currency’s strength, fell 0.8% last week, its biggest weekly drop since June. A weaker dollar is generally supportive of precious metals.
Silver is outshining gold for several reasons. For one, the market is thinner and liquidity can evaporate quickly; while the London gold market is underpinned by around $700 billion of bullion that can be lent out in the event of a squeeze, no such reserve exists for silver. That historic supply squeeze happened in October, and vaults in London have drawn sizable inflows since.
This has led to shortages elsewhere. In China, silver kept in warehouses linked to the Shanghai Futures Exchange last month hit the lowest level since 2015. Added to that, much of the world’s readily available silver remains in New York as traders await the outcome of a US Commerce Department probe into whether imports of critical minerals pose a national security risk. The review could pave the way for tariffs.
Unlike gold, silver also has many useful real-world properties that make it a valuable component in a range of products like solar panels, AI data centers and electronics. With inventories near their lowest on record, there’s a risk of supply shortages that could impact multiple industries.
“The dominant driver of late has been a severe structural supply-demand imbalance in silver, sparking a scramble for physical metal,” Sycamore said. “Buyers are now paying a remarkable 7% premium for immediate delivery compared to waiting a year.”
Technical indicators show the rally in silver may have run too hard, too fast. The metal’s 14-day relative strength index showed a reading of more than 76, above the 70 that is considered to be overbought.
Spot silver fell 4.2% to $75.97 an ounce as of 3:30 p.m. in Singapore, having hit a record of $84.01 earlier in the session. Gold edged down 1.4% to $4,471.48, below a record of $4,549.92 hit on Friday. Platinum fell 6.8% and palladium by 13%.
Source: Bloomberg.com
