Silver experienced a historic drop on Friday, raising concerns among traders that the downturn may not yet be over. Jeffrey Christian, a veteran commodities analyst and managing director at CPM Group, noted that the recent plunge follows a remarkable surge over the past year, where silver prices soared by over 200% due to various economic factors and increased investor interest.
On Friday, silver prices fell more than 30%, attributed to a stronger US dollar and investor reactions to a recently announced Federal Reserve leadership change. Despite this setback, Christian expressed optimism that silver could maintain elevated prices, potentially even rising through 2026, underpinned by ongoing inflation concerns and the metal’s reputation as a safe-haven asset. However, he warned that should prices continue to decline, a mass withdrawal of traders from the market could occur. He predicts a worst-case scenario where silver could drop to $68 an ounce, indicating a further 17% decline from late Friday’s pricing.
Christian believes that market behaviors, particularly among speculators, are cyclical and not surprising. He pointed out the phenomenon of speculative trading leading to rapid price movements, followed by swift reactions to profit-taking, as evident in the sell-off witnessed on Friday.
To gauge whether more declines in silver prices are imminent, Christian’s firm is monitoring several key indicators:
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Trading Activity:
Christian is paying close attention to trading volumes and momentum in the silver market, which could signal waning investor interest. He noted that retail traders had recently shown significant enthusiasm, buying a record net $171 million worth of shares in the iShares Silver Trust ETF, surpassing even the buying frenzy observed in 2021. Additionally, metrics like “Turnover Momentum” indicate heightened activity in silver compared to other investments, suggesting that retail investors are currently heavily involved. -
Silver Supply:
An increase in silver supply could also dampen price momentum. Reports indicate that the imbalance between silver supply and demand is tightening, with supply projected to rise by 2% by 2025, while demand is expected to decrease by 1%. Christian mentioned that indicators, such as the volume of silver that can be extracted from reserves and the backlog at silver refineries, suggest that more silver could soon flood the market. -
Open Interest in Futures:
High open interest in silver futures has been a supportive factor for prices. Christian highlighted that open interest for March 2026 silver contracts is currently around 500 million ounces. As these contracts approach their delivery dates, investors might roll their contracts forward, maintaining upward pressure on prices. However, a decline in open interest could significantly remove this support.
Market reactions to silver are becoming cautious amid concerns about speculative bubbles. Analysts like Marko Kolanovic have forecasted a potential 50% drop in silver prices, stating that heightened speculation poses substantial risks for reversal. Jose Torres, a senior economist, shared a similar sentiment, emphasizing the volatility that arises from significant speculative movements in commodities.
The unfolding dynamics surrounding silver’s price will be closely watched by both retail and institutional investors in the coming weeks.
