Silver Faces Potential Further Declines After Recent Plunge
Silver experienced a significant drop on Friday, with indications that traders should remain cautious, as the pressure may not have lifted. Jeffrey Christian, a veteran commodity analyst and managing director at CPM Group, shared his insights on the market.
A mix of economic forces and investor enthusiasm had pushed silver’s value up over the last year, but it recently endured a sharp correction. After gaining more than 200%, silver fell by over 30% on Friday, influenced by the strengthening U.S. dollar and President Trump’s nomination for the Federal Reserve leadership.
Christian suggested that this decline might continue, as he is monitoring a variety of indicators that could signal more downside for silver. He maintained a cautious outlook, asserting that even after the downturn, silver could still rise or maintain its value through 2026, largely due to ongoing worries about inflation and a robust U.S. dollar. These factors are encouraging many investors to look to precious metals as a refuge.
Nevertheless, Christian warned that if silver’s prices continue to fall, there might be a mass exit from the market. He pointed out that in a worst-case scenario, the metal could potentially drop to $68 an ounce, translating to a 17% decline from recent afternoon prices. “This is typical market behavior,” he remarked, noting that speculators often rush in during bullish trends and can just as easily withdraw.
His firm is currently scrutinizing several signs that may indicate the slowing of speculative excesses in the silver market. Here’s what they are watching:
1. Decline in Trading Activity
Christian mentioned he is on the lookout for signs of waning investor interest in silver, which could slow down its momentum and prompt speculators to exit. He emphasized the importance of monitoring trading momentum, not only in the silver’s price but also concerning silver-related bonds and ETFs.
The surge in silver trading, which Christian believes began in September, continued through Friday, especially after the Federal Reserve hinted at more aggressive rate cuts than anticipated. Retail traders invested a record net of $171 million in stocks on Monday, which according to data, surpassed the transactions during 2021 when there was a frenzy over short selling in metals.
The trading activity for silver significantly surged to 11.55 times its usual pace early in the week, while Nvidia’s trading was at 7.54 times, indicating silver has become increasingly popular among retail investors.
2. Influx of New Silver Supply
Christian remarked that an increase in silver inventories could further dampen its momentum. The gap between supply and demand has been closing, with global silver supply projected to rise by 2% by 2025 and demand anticipated to drop by 1%. He noted signs of potential increased supply, pointing out the rising amount of silver that can be extracted from reserves and delays at silver refineries.
3. Low Open Interest
Christian also highlighted that elevated open interest in silver futures has been supporting prices recently. He specifically cited the active March 2026 silver contract on the COMEX exchange, which involves around 500 million ounces of silver. As the delivery of these contracts approaches, some investors may move them into the final month, which could maintain upward pressure on silver prices. A decrease in open interest, he warned, could reduce this upward pressure.
Despite recent sell-offs, Christian suggested that prices might remain high into March. Observers have become cautious following silver’s dramatic rally, with some predicting a steep decline. Marko Kolanovic, a former JPMorgan analyst, suggested that a 50% drop in silver prices is likely, given prior commodity speculation trends. Jose Torres, an economist, echoed this sentiment, stating that significant speculative movements carry the risk of a downward shift.
