Silver’s Record Rally Meets Abrupt Year-End Reversal

Silber Preis XC0009653103

The silver market experienced a dramatic shift in fortunes during the final week of the trading year. After surging to an unprecedented peak above $83 per ounce, the metal's value collapsed, erasing over 10% in a matter of days to settle near $70. This sharp correction was primarily triggered by a regulatory move from the CME Group, which increased margin requirements for precious metal futures contracts for the second time in one week.

Even with this significant pullback, silver is poised to close 2025 with a staggering gain of approximately 150%. This performance marks its strongest annual advance since 1979, far outpacing all major equity indices. The rally has been fueled by a powerful confluence of factors: historically low inventories, robust industrial demand from the solar panel and artificial intelligence data center sectors, its official designation as a critical raw material in the United States, and supportive interest rate cuts by the Federal Reserve.

Margin Hike Forces Speculative Unwind

The CME's decision to raise margin requirements forced traders to post substantially more capital as collateral. This action precipitated a wave of forced liquidations, driving prices sharply lower. On Monday, silver plunged 8.7%, its most severe single-day loss since February 2021. A brief recovery attempt on Tuesday was quickly overwhelmed by renewed selling pressure on Wednesday. The exchange cited a "routine review of market volatility" for its decision, though the year-end timing dealt a sensitive blow to market sentiment.

China's Export Policy Looms Large

A major structural factor underpinning the market is China's dominance, controlling an estimated 70% of the global supply of refined silver. New export restrictions are scheduled to take effect on January 1, 2026, a move that Tesla CEO Elon Musk has criticized as "not good," given the metal's essential role in numerous industrial applications. The tension in the physical market was highlighted by a notable disparity: while U.S. traders sold around $75 per ounce, buyers in China were paying premiums as high as $90 during the sell-off—an unusual indicator of tangible physical scarcity.

Key Market Data:
- Silver declined from over $83 to roughly $70 (-15%)
- Annual gain for 2025 remains near 150%
- Physical silver trades at a 7% premium to futures contracts
- New Chinese export limits begin January 1, 2026

Elevated Volatility Expected to Continue

The current premium for immediate physical delivery over futures contracts stands above 7%, reflecting buyer anxiety over future supply shortages. Market analyst Edward Meir of Marex suggests a move toward $100 per ounce in 2026 is plausible. Furthermore, the historical gold-to-silver ratio of 30:1 would imply a price of around $150 at current gold valuations. Whether such a level is attainable will largely depend on global refining capacity and the trajectory of industrial demand, setting the stage for continued market volatility.