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 as much as 5% on Monday, after earlier spiking to a record $84 an ounce following five straight days of gains. A weaker dollar and escalating geopolitical tensions have added to the appeal of precious metals during an end-of-year jump to all-time highs for silver, gold and platinum.
“Make no mistake: we are witnessing a generational bubble playing out in silver,” said Tony Sycamore, a market analyst at IG Australia.
Silver’s rapid acceleration caps a yearlong rally for precious metals 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.
In the last week, frictions in Venezuela — where the US has blockaded oil tankers — and strikes by Washington on Islamic State in Nigeria have 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 gold and silver.
Silver is outshining gold for several reasons. For one, the market is thinner. Tighter inventories and liquidity that 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 liquidity squeeze, no such reserve exists for silver. That historic supply squeeze happened in October.
“The dominant driver of late has been a severe structural supply-demand imbalance in silver, sparking a scramble for physical metal,” said Sycamore. “Buyers are now paying a remarkable 7% premium for immediate delivery compared to waiting a year.”
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 or other trade curbs on the metal.
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.
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 almost 80, far above the 70 that is considered to be overbought.
Spot silver rose as much as 6% to a high of $84.00 an ounce before crashing 3.6% to trade at $76.47 as of 8:38 a.m. in Singapore. Gold fell 0.9% to $4,495.73 an ounce, below a record of $4,549.92 hit on Friday. Platinum and palladium both retreated after hitting records in the previous session.
